By LEIGH ROBERTS

INVESTORS the world over breathed a sigh of relief this week as Wall Street strongly recovered from its sharp losses of last Friday.

Fears of a rise in US interest rates - which sparked Friday's sell-off - were dampened after the governor of the US Central Bank, Alan Greenspan, laid to rest the threat of an imminent rise.

The latest buzz among the inner circle of Wall Street brokers and analysts is that the market will rise even further - and the "Rule of Seven" tells them so.

The Rule of Seven provides a rationale for the current long bull run in Wall Street. Here's the rule summed up by Tom Galvin, chief equity strategist of Deutsche Morgan Grenfell in New York:

It's generally accepted that, over time, the growth in share prices follows the growth in the underlying corporate earnings. The earnings growth of the companies included in the Dow Jones Industrial Index has averaged at a compounded 7% over the last 40 years.

Mathematically, if you compound any figure at 7% a year, you will have doubled your initial figure after 10 years.

So as company earnings have grown by 7%, you would expect share prices to have doubled every 10 years. But the Dow hasn't followed suit.

The index first hit 1 000 in 1966. Applying the Rule of Seven, in 1976, 10 years later, the index should have doubled to 2 000. In 1986, it should have reached 4 000, and in 1996, 8 000.

In reality, the Dow hit 2 000 only in 1987 - 11 years behind schedule. The bull run in recent years, says Galvin, has merely been a "catch-up time" in which the index gained lost ground. Last week, the index finally caught up with corporate earnings - the Dow reached 8 000, only a few months behind the scheduled date of 1996.