Tabell’s Market Letter – April 10, 1947

Technical Market Action Thursday's arket was fir and irregularly higher until the last fel7 minutes of trading \;hen softness in the steel issues caused a fractional dip frOI!\ the hi.;hs. Volume \.as restricted, hovever, ',ith 250,000 shares in the final hour nd 680,000 total for the day. Despite the last l.linute softness, the averages closed fractionally higher with industrials up 58 cents at 173.98 and the rails 15 cents higher at 47.27. So far, in the face of cxtre,;Je nervousness and pessiT.1ism and unfavorable labor neliS, the lJarket has succeeded in holcAine; above the im- portant 172-170 level. The January lor v;as 170.15, the .,larch 10\7 was 171.94 and i.eunesday's 10Vi vias 172.59. If these points hold, an extrerlely consi.ructive pattern would be forlled ith a triple testing of the 172-170 level. Another constructive developnent has been the gradual dropping off of volume since the September decline. Actual fiures are not available at present riting, but on each successive sell-off of the narket since the initial decline of Septenber, the voluge has been smaller. On a graph of the volume, a line drav.n through the hi,ths of volue shol's a definite down- vlard tendency indicating a ,;radual lessenint,; of selling pressure. The volume of selling that has occurred i,1 the last t.o l;lonths has cone about in a rather curiOUS fashion. On several occasions, notably on February 25th, ;Jlarch 7th, ,ilarch 10th and on this 'l'uesday, the lJarket lias hit by a sudden v;ave of selling, in each instance in the final hour of trading. Stranbely enough, this weakness had no follov/-through in the next IJiorning's trading. Liquidation of investment accounts would hardly adopt this nethod of disposing of stocks. That 13ethod would defeat its ov;n purpose. The si,c;nificance of this type of selling is rather difficult to fathom. e/ However, Viith the present pessil.1ism and nervousness 'Jout, the market could sell somewhat 10l7er if the 172-170 level is broken. In that event, the avoraes could work do..n to around the Octo'Jer lows in the 165-160 area. This would in no way effect the lon,ser tern patten of eventually highH levels although it lllii;ht delay it rJo!lentarily. liould expect such e. dip,Vlhen as ana if it occurs, to be sharp and of short duration. Such a dip should present an excellent buyin opportunity./ \\bat ost of the pessinists do not take into consid6r-'ltion today is the fact thut the r.1arket has already declined froLl 213 to 161, a decline of 52 points, or approximately 25 since iAay. This cecline r,-as in anticipation of a recession in business, a dip in e,ploynent anti a lo..erin of cOUlilodity prices unong other thinGS. So far this has not occurred. Business indices heve reached nell hiG-hs and earnings in most inst1nces have reached record levels. If this recession or transition occurs in the near future, is the market going to discount the sa.1e thing twice This hardly seejS possible unless the recession (which has still not yet occurred) turns into a lllajor depression. This eventually is not envieioned by even the 1.IOrG bearishly inclined who expect the market to work down to the 150-130 level where they 'lill be a purchase for a new and largo upswin. It will be interesting to see if pric ss react anywhere near these levels or 'Ihethcr the individuals who are unvilling to buy at this level v.ill be forced to enter the ;larket when the February highs arc penetrated. hould be inclined to believe that it will be the latter event that nill actually transpire. April 10, 1947 Closing Dow-Jones Industrials DOVl-Jones Rails Dow-Jones 65-Stock SHIELDS & COi.!PANY 175.98 47.27 62.20 The opinions ezpressed in this letter ere the persone1 int.rpr.tetion of charts by Mr. Edmund W. Tabell and are not presented a. th opinions of Shield. & Com.ny. 1