Viewing Month: December 1947

Tabell’s Market Letter – December 03, 1947

Tabell’s Market Letter – December 03, 1947

Tabell's Market Letter - December 03, 1947
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Technical Market Action 'The issues in the oil group were among the first to penetrate the upside of their trading ranges and indicate favorable technical patterns. Like the steels, they are selling at price to earnings ratios' that seem quite out of line when compared with 1937 prices d earnings. There are nine oil issues in our recoended list. They are tabulated below together with 1937 highs and earnings and the esti- mated earnings for 1947 based on earnings for the first nine months. Barnsdall Cities Service Gulf Oil Houston Oil Ohio Oil Pure Oil Seaboard Oil Standard Oil of B.S. Texas Pac. Coal & Oil 19'27 High Earnings 35 1/4 1.26 62 1/2 17 5/s 227/8 24 3/8 i 1/8 165/S 3.51 1.01 1.31 2.15 1.97 5.64 loll 19.!I1 AEErox.Price Estimated Earns. 32 3.80 36 8.00 70 9.35 26 3.25 27 4.40 24 4.S0 34 4.75 76 10.50 42. 4.50 As we noted in our recent letter on the steels, if the optomistic appraisal of earninEs that prevailed in 1937 were translated into present earnings it would mean fantastically higher prices. For example, on the basis of the price to earnings ratio at the 1937 highs, the highs for 1947 would have been as follows Barnsdall Gulf Oil Houston Oil Ohio Oil Pure Oil Seaboard Oil Standard Oil of N.J. Texas Pacific Coal & Oil Actual 1947 High 34 1/4 74 3/B 26 1/2 27 3/4 28 3/4 35 3/8 SO 44 3/4 High on Basis 19.37 PiE 64 166 55 77 53 106 141 67 Obviously, these prices appear ridiculous and are not to be interpreted as a forecast. The purpose of the projection i6 simply to contrast the extreme optimism of the market ps,ychology in 1937 as compared with the pessimism of today. The optimism of 1937 proved to be unfounded. It is possible, is it not, that maybe the gloom of today is also just a bit unwarranted and that earnings in 1948, even if moderately lower, may be valued somewhat more realistically than they are at the moment. If market psychology changes to that extent, it should result in sharply higher stock prices. From a technical viewpoint, all of the nine issues listed above appear headed for higher price levels. Would uso periods of market weakness'to add to holdingst Wednesday's intra-day lows of 179.18 and 47.31, the market was testing ! last Friday's lows of 178.87 and 46.99. The industrial average, last Friday, pene- trated the previous November 17th low of 179.57 but the rails held above their November 14th low of 46.32. This ability of the rail average to hold above a previous low after a downside penetration the industrials is rather interesting action. Since early 1946, the rails have been the leaders on the downside. ThiS, I believe, is the first time in a long while that the rails have shown better market action than the industrials. A continuation of this action might prove SignificantAbility of both averages to hold above last week's lows would be distinctly encouraging for the near term. A joint penetration on the downSide Vlould indicate a continuance of the 'slow down drift under the influence of tax' selling and switching. However, the leaders have built up only minor distribution areas and there is good support in the 177-175 area – just bal.ow our previously indi cated 178-180 'Support area. . December 3, 1947 EDMUNDW. TABELL SHIELDS & COMPANY Closings DOVi-Jones Industrials Dow-Jones Rails DOW-Jones 65-stock 179.63 47.49 63.15 The opinhnts expressed in thi, letter BAlI the personal interpretation of charts by Mr. E4mund W. TRen and are not presented as the opinions of Shields Company,

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Tabell’s Market Letter – December 05, 1947

Tabell’s Market Letter – December 05, 1947

Tabell's Market Letter - December 05, 1947
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Technical Market Action The market broke sharplY on Friday to reach a low of 175.46 on the industrials and 46.00 on the rails. Volume increased, particularly in the fourth hour when the tape was several minutes late. Total volume for the day was 1,290,000 shares. The sell-off in the industrial average was accentuated by a 7 1/4 point drop in Allied Chemical which declared an extra dividend but failed to split the stock as ruQored. Friday's sell-off appeared to have soe of the characteristics of a selling climax. While the comeback fro the lows was not particularly impressive, several groups that have hitherto been weak seemed to meet good support. This was particularly true in the rails, utilities and some of the merchandising issues. While the decline was sharp, the industrials held in the 177-175 eupport range mentioned in our preVious letter. Our recent comments on indiVidual issues have centered on issues that have been acting better than the market. These stocks, even at present prices, are conSiderably above the originally recoended prices and the lows of the year and are not targets for tax selling. It might be appropriate at the moment to draw attention to a number of issues that have been heavily depressed by tax selling but appear to be at or near their downside objectives as measured by the broad distribution areas of early 1946. As tax selling abates later in thA month these issues could have a good technical rebound in the process of building up their base patterns. The list follows L' Alle gheny Ludlum American Cyanamid Atlas Corporation Consolidated Vultee Eastern Air Lines Evans Products Fansteel General Railway Signal Pepsi-Cola Seaboard Airline Twentieth Century FOX 1946 High 61 1/8 63 3/4 34 3/8 33 5/8 33 3/8 33 3/4 42 JJ3 40 1/2 37 3/4 63 7/8 t947 ' liigh 48 1/2 54 1/2 26 1/2 17 7/8 24 1/4 24 1/2 22 3/4 31 1/2 34 LIs 24 5/8 38 3/4 1947 b!2!I…. 27 3/4 39 21 5/8 101/2 16 18 12 19 22 11 1/4 21 5/8 Last Sale 28 39 1/2 22 ' 12 161/4 18 5/S 12 21 22 1/2 13 1/2 22 While these issues m be SUbJect to some further tax selling as the month goes on, would take advantage of any weakness to add to the list. December 5, 1947 ElXIIUND W. TABELL Closings Dow-Jones Industrials Dow-Jones Rails Dow-Jones 65-Stock SHIELDS &, COMPANY 176.10 46.28 61.92 The opinionl flxpreued 1n this letter are the personal interpretation of cham by Mr. Edmund W. Tabelland IIIr. not presented as the opinions of Shield. & Company.

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Tabell’s Market Letter – December 08, 1947

Tabell’s Market Letter – December 08, 1947

Tabell's Market Letter - December 08, 1947
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Technical Market Action -. How much risk is involved in holcing stocks at present price levels Obviously, there is always risk involved in holding equity securities but is there an inordinate anount of risk at the present time In other worG.s, what are the possibilities of a severe decline of, let us say, irty-five to fifty points from present levels Those inclined to the bearish side of the picture cite the following technical factors – (1) Earnings are high and most likely at or near 11 peak due to narrowing profit margins, completion of inventory buying, etc., etc., etc. Stocks should be sold when earnings are high as witness 1929 and 1937. (2) Stock prices are historically hibh. They are selling right now at the highest price level in the past fifteen years with the brief exception of 1937. (3) Bond prices have started to decline. A decline in bond prices occurred before the market breaks 'of 1929 and 1937. These appear to be an ominous array of facts. Let us analyze each of them – (1) Earnings are high and may be at or near a peak just as they were in 1929 and 1937. That could be true. But that is about the only point of similarity ,with 1929 and 1937. In 1929 and 1937 stocks Vlere selling, in the najority of jnstances at 15 to 20 times earnings. Today even highgrade stocks are selling at five to eight times earnings and, in the case of more speculative issues, at three to four times earnings. In 1929 and 1937 everything vms optimilltic. Today, there is extreme caution and pessimism. In 1929 and 1937, there Were high speculative positions built up. Stocks were held on slim margins and even a slight drop in prices touched off a wave of forced liquidation. Today th6re is little or nothing to liquidate in the stock market. Mrgin positions are negligible and amply protected and most houses haVE large free credit balances. In fact, the market seems to be in a position more like 1942 than 1929 and 1937. In 191.2 stocks Vlere also selling at extremely low price to earnings ratios and pessimism was rife. From 1942 to 1945 earnings declined in many companies, yet prices advanced. (2) The market is hibh historically. That is true. But only on the basis of a 1939 dollar. Almost every comr,lodity hes advanced 75 to 150 in price since 1939. The stock market hasn't. The dollar today has a purchasing power of N only 50 to 60 of the 1939 dollar.OJ;) the basis of a 50 cent-60 cent dollar, the market is selling at 88-115 or around not only the 1942 lows, but the lows of mid1933-1935. To expect a decline to 140-125 in today's prices or an equivalent of 70-63 on today's dollar value, seems just a'little bit out of line witil the facts. The only time that level was reached in the last twenty-five years was in the depths of the 1932 depression. (3) Bond prices have started a decline just as they did prior to 1929 and 1937. However, the situation today is quite different. In 1929, many stocks were yielding less than AAA bonds, and in 1937, were yieldin only a little more. Today, even after the decline of the last month in the bond market, the spread in yield between stocks and bonds is the greatest, with the possible exception of 1942, in twenty-five years. / The market has held in a relatively narrow trading rangE between, roughly 160 and 187 for over fifteen months. !any individual issues have broken out of their own individunl trading ranges t.o indicate up trenrls . In the breat maj ori ty of instances, stocks have already reached their downside objectives as outlined by the early 1946 distributional tops. It would appear that the probabilities indicte that the 160-187 range is an accumulation area. Since September 1946, this letter has advocated purChases in the 160-170 buying area. This area has been entered on numerous occasions and there is no reason that, before the advance starts, it may 'not be entered again. In fact, if the 177-175 support area of the present market is penetrated on the downSide, would expect a dip to the 171-168 area. This mayor may not occur. However, Vlould consider such a dip, if it occurs, as a buying opportunity. It would enlarge the base pattern and indicate even higher levels than the possible 2l02l5 noVi indicated as the intermediate objective if the July hiehs are penetrated! Monday's action was favorable. The averages pulled away frora the 174.02 low of September to close at 176.71, up 97 cents on the day. Ability to hold above the September 10Vi wlld indicate, after further backing and fillin5,the possibility of another testing of recent highs. EDMUND W. TABELL December 8 1947 The opiniON …r.ed In this leHer er. 'h. ,!flS'.&,rqhjljJ!,\eIJ's by , Mr. Edmund W. label! and are not presented arflie-C)pliilons Of lietal'mp.an1. –

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Tabell’s Market Letter – December 11, 1947

Tabell’s Market Letter – December 11, 1947

Tabell's Market Letter - December 11, 1947
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I———————————- Technical Market Action In the rise from the low of early 1942 to the high of mid-1946, the roils led the market. That is, after each technical correction or consolidntion, the advance was resumed under the leadership of the rails. One of the first danger signs in 1946 was the inability of the rail average to penetrate the February high after the industrials ,had pushed through py over five points. From May 1946, the rails have been the weaker group. The rail averaie,from that point on,has led each decline. While the October, 1946 low in the industrial average held in the May 1947 decline, th rail average made a new low. On each advance, the rails were laggard. On each decline, they were the first to sell off and penetrate previous support levels. Since mo8mber,-bowever, there has been evidence of a possible change in this laggcrd action of the rails. The rail average reached a low of 46.32 on November 14th and the industrials reached a comparable low of 179.57 on November 17th. The subsequent rally carried the rail average to 49.28 and the industrials to 183.97. Since that time -the industrials decisively penetrated the November low to reach 175.44 on December 6th. The rail average, on the other hand, held at 46.00, just a fraction below the November low of 46.32. At Weesday's high of 48.21, the rail average was only about a point below the last rally high of 49.28. Ability to penetrate that figure,on volume, would be a very constructive sign and could possibly signal a very important turn in the market. There are four rail issues in our recoonended list. They are Alleghany, pfd. (37 7/8), Illinois Central (261/8), Seaboard Air Line (14) and Union Pacific (149). Two of the issues, Illinois Central and Union PacifiC have shown excellent action and are considerably above originally recomended levels. Alleghany, pfd., a recent recomnendation, is two or three points below our orginal recoonendation and Seaboard Air Line is quite a bit lower. Believe all four are suitable for purchase around present levels. Even more than in other groups, selection is of prie importance in the rail group. The technical patterns are quite diverse. As a general statement would be inclined to avoid the eastern roads. Some, such as New York Central and Penns.ylvania, which'have been targets for tax selling, might have a quick rebound when tax selling abates, but their longer term pattern is not favorable. '…… ……… In addition to the four iSSues mentioned above, like the technical patterns of Atchison, Topeka & Santa Fe (841/4), Gulf,Moblle & Ohio (123/8), Kansas City Southern (23 7/8), Northern Pacific (19 )/B) and Southern Pacific (44 )/4). ,/ The industrial average has so far succeeded in holdin above the September low of 174.02 and indiVidual issues, particularly the Oils, have moved into high ground. Year-end markets are noted for their irregularity and cross currents. Would use any weakness in the next two weeks to add to holdings. EDMUND W. TABELL' December 11, 1947 Closings Dow..Jones Industrials Dow…Jones Rails Dow…Jones 65-Stock SHIELDS & COMPANY 177.32 47.66 62.67 The opinion. expressed in this fetter ere the personal interpretation of cherts by Mr. Edmund W. Tabell and iIIf. not presented os the opinions of Shields & Company.

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Tabell’s Market Letter – December 15, 1947

Tabell’s Market Letter – December 15, 1947

Tabell's Market Letter - December 15, 1947
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Technical Market Action The rails continue t.heir excellent technical action and, at Monday's hibh of 50.15, had decisively penetrated the November hibh of 49.28. This is extrenely encouraging fron 0. tecr4lical point of view and indicates the probability of a nearby testing of the July hieh of 51.92. To SO1e students of the Dow Theory, a penetration of that level would indicate a new bull market signal because, whlle the rnils had reached a higher level of 53.65 in February, the average declined to a new low of 40.43 in May. Since that time, it rallied back to 51. 92 in July and the recent decline held at 46.00. Ability to relly above 51.92 would, therefore, indicate e new r.lajor uptrend. The industrial average Signalled a major uptrend in July when the average penetrated the February high to reach 187.66. Confir!astion of this uptrend by the rail average would complete the patte;rn of a new bull narket. However, other Dol'I Theory schools of thought vloulJ possibly require a penetration of the July high of 187.66 in the industrials as well as the February high of 5J.6 in the rails. All of this is possibly interesting but only of acadenic importo.nce. There have been a large number of individual issues that huve been in bull narkets of their ovm for the past year. The oils have been an outstandin,; example of this type of action. Ther are nil.e oil issues in our recomended list. They are tabulated below with their originally recom;aended level and approxinate longer tenil price objective as determined by their individual technical patterns. Originally Last . . Recommended At Sale Ba!'llsdall Cities Service Gulf Oil Houston Oil Ohio Oil Pure Oil Seaboard Oil Standard Oil of N.J. Texas Pacific Coal & Oil 21 28 60 17-15 23-21 23 7/8 25-23 66 5/8 29 37 1/2 41 – 45 38 1/4 62 65 71 3/4 86 – 89 27 3/8 40 31 1/8 ;8 -41 27 36 – 42 37 1/2 42- 49 76J1-4 44 1/ 8 – – .. 9509– -100 Several, mostly producing issues, made new highs for the year on Monday. In some instances these issues have reached a higher price level than at the bull market top of 1946. It l'Iill be noted also that some isSues have moved ahead faster than others and are closer to their ultimate price objectives. The industrial average, at Monday's hi,h of 180.56, was in the lower part of the 180-185 range in which the market held for most of October and Nover.lber. This area may furnish some upside resisGance and would expect a consolidation and a shifting and rotatint; of strength as the narl,et attempts to break throubh this resistance. . Continue to advise purchase of reco;amended issues during periods of market irre5ularity. Believe that eventually both averages will be penetrated upside. If this occurs, would expect 210-215 and 65-70 to be the ultimate intermediate term objectives. However, Vlould continue to concentrate on the technical patterns of individual issues rather than the averages. EDMUND W. TABELL December 15, 1947 SHIELDS & COMPhNY byThe opinions exptened in hi, letter ere the penanal interpretation of chert. Mr. Edmund W. Tab1I end ere not presented as the opinions of Shields & Company. \

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Tabell’s Market Letter – December 17, 1947

Tabell’s Market Letter – December 17, 1947

Tabell's Market Letter - December 17, 1947
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Technical Market Action The ra.ils continued their leadership on Wednesday and advanced 1.18 to close at 50.50. The industrials gained only 37 cents. At the days high of 50.63, the rails were less than a point and a half below the July high of 51.95. As nentioned in a recent letter, this is very encouraging technical action. It is the first tir.18 since early 1946 that the rails, the leaders of the 1942-1946 advance, have lead un advnce in the IJP.rket. Frotrl February 1946 to early this IJonth, they have been the leaders on each decline. Listed below is our conplete list of recot1.111ended issues. These issues have been advised for purchase c.t various ti;,Jes fron Septetrlber 1946 to date. A great Dany have been recoIllfJended during the nunerous descents into our lonf, advised 160-170 buying rang'. Others have been recomr.Iended as recently as the past ten days as possible beneficiaries of the abatefJent of tax selling. Also listed below are the 1946 highs for each issue. It ll be noted that in nutrlerous instces several of our recomended issues are now selling higher than their 1946 hiehs while the industrial average is 33 pOints lOVier. We expect a great trlany trlore issues to reach levels above their 1946 highs. Others, obviously will not reach thes levels. Lack of space precludes giving the indicated technical price objective of each issue. These will be given in subsequent letters. 'Adans Express Allegheny, pfd. Allegheny LudlutrJ Amer. Cyanami41 luner. WaterWorks Atchison, Top Atlas Corp Barnsdall Oil Bliss (E.17.) Borg Warner Campbell Wyant Celotex Chrysler Cities Service Colorado Fuel Consolo Vul tee Crovm Cork & Seal Deere & Co Doehler Jarvis Eagle Picher Eastern AirLines Elec. Pro & Lt. Elliott Evans Prod Fansteel Flintkote Foster Wheeler General Cable General Motors General Rwy. Gulf Mobile Gulf Oil Houdaille Hershey Houston Oil IllinoiS Central Interlake Iron Last Sale 17 41 30 3/8 39 1/4 16 1/.4 87 3'/4 22 1/4 37 31 1/4 54 30 26 1/2 63 38 15 1/2 13 44 1/4 44 3/8 37 21 5/8 17 7/8 17 3/8 18 3/4 20 12 7/8 36 30 3/4 12 1/4 57 3/8 25 13 3/4 72 1/2 17 1/2 27 1/4 28 1/4 13 7/8 1946 lWh Last Sale 24 3/4 D1ternational Paper 54 7/8 69 1/4 Inter.Minerals 32 3/4 61 1/8 Joy Manufacturing 39 3/4 63 3/4 Kansas City So. 27 1/4 28 3/4 Mullins Mfg. 25 121 Murray Corp 161/4 34 3/8 National Supply 22 5/8 31 Northern PacifiC 2l 3/4 33 1/4 Ohio Oil 30 7/8 61 3/4 Oliver Corp 26 5/8 40 3/8 38 1/8 Pepsi Cola Phelps odge 24 1/2 48 1/8 70 1/2 adj.Pure Oil 27 41 7/8 Rr.dio Corp 9 5/8 23 3/4 Rayonier 29 7/8 33 5/8 Revere Copper 19 1/4 62 Schenley 33 3/8 58 1/2 Seaboard Oil 38 1/4 37 7/8 Shanrock Oil 29 3/4 30 1/8 Sharon Steel 35 1/4 33 3/8 adj. Siml'lons . 341/4 29 1/2 Southern Pacific 47 1/2 39 1/2 Standard Oil N.J. 77 33 3/4 Texas Pac. Coal 45 42 adj. Twentieth-Cent.Fox 22 3/4 46 49 7/8 1/2 Union Bag Union Carbide 33 1/4 102 3/4 16 3/8 Union Pacific 153 80 3/8 48 United Aircraft U. s. & Foreign 24 1/8 8 1/4 39 1/4 U. S.Pipe 44 78 Westinghouse Air B. 37 1/2 28 3/8 WestinghoBse Elec. 29 3/4 30 Wneeling Steel 46 45 1/2 Worthington PutrJp 62 20 1/4 Youngston Sheet 763/4 1946 ll.i.gh 55 1/2 45 34 40 1/4 22 1/4 22 25 36 29 5/8 36 40 1/2 48 28 7/8 19 33 31 3/4 100 39 1/2 32 1/2 40 3/8 56 7/8 70 78 3/4 32 5/8 63 7/8 39 125 168 1/2 37 3/8 32 1/2 60 1/4 41 5/8 39 3/4 62 1/2 74 83 7/8 Foster Wheeler is a neVi addition to the list. December 17, 1947 EDMUND IV. TABELL SHIELDS & COMPANY Closings Dow-Jones Industrials DOVi-Jones Rails Dow-Jones 65-Stock 179.81 50.50 64.11 The opinions expressed In this leHer are the personal inlMpreleilon of charts by Mr. Edmund W. Yabell and are not presented as the opinions of Shields & Company. . ..,.—.-

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Tabell’s Market Letter – December 22, 1947

Tabell’s Market Letter – December 22, 1947

Tabell's Market Letter - December 22, 1947
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Technical Market Action After epproxinute1y equalling the July closing high of 51.63, the rails net sone profit-taking on Monday and c10sec fractionally lower on the day. At Snturdays closing of 51.70, the ruil averq;e v,as at a lev,l thQt has een approsched on nunberous occasions, Ilince the Septetlber, 191,6 '-ecllne . The rc.ll average rellched a closing rally high of 51.22 in Novenber 1946, 52.67 l.n Decnber 1946, 53.42 in February 1947, 51.63 in July 1947, and 51.19 in Octoher 1947. Thus, this is the sixth occasion in the past sixteen nonths that thE' ruils hQve attenpte1 to penetrate this level. The action of indivic'.ual stocks indicQte that th;is tiI'le. the attempt may be successful. Such c.n event WOUld, be of extrelle l.!lportance technl.cally, and indicate the stp.rt of a very inportant upsving'lin the general narkct. Starting below is an a1phabeticnl review of our list of recon- nended issues. Believe these issues offer better than Ilverake chnnces of narket appreciation. –c hdans F,xpress (17 5/13) is an investnent trust issue Viith higher than o.verage leverage. The stock llo.de a double bottotl at 13 1/13 in October 1946 and in May of this year. This low was in line with the downSide objective of 13 outlined by the distributional pattern of early 1946. The stock has been bui.l'-ing up a base area in the 14-17 range, and vms recor.Jr.lended for purchase in June at 14 7/S. The base area was recently penetrated upside and the 10n,;er tern objective is 26-30. The 1946 hish Vias 24 3/4. The stock vill tlove in line with the general averages and appears to btl in a strong technical position. Alle.-,hoJw Lud1uD (31 5/8) was recoWDEOnded at 28 on Decetlber 5th as an issue tha seeed overly depressed by ta selling and could rebound quickly after the pressure was lifted. The stock closed at 31 5/13 on Monday. Would expect SODe further rally to the 35-37 resistance area. ' its approxitlate heny Pfd. donsde objective (40 l/S) at 25 1/4 This extretle1y vo1Rti1e issue reached in May. A large potential base area has been built up in the 26,44 area that would indicat an obj ecti ve well above the the 1946 high of 69 1/4, if the area is penetrated upside. Over the nearer tem, the technical pattern indicates the.t e. penetration would indicate a ,-uick rally to the 54-59 reSistance area. ferican CyanaDid (39 3/4) This issue is selling close to the years low of 313 5/8 and appears to be in an excellent position to rally sharply as the pressure of tax selling abutes. At pres.mt levels, the stock is at -ehe very strong support level of 40-313. The stock has sold hieher than the present price in every one of the past fi ve ye.rs. The 1946 high \Cas 63 3/4. Fro'1 a technical vievlpoint, the stock appears to be an attractive purchase. American Water Works & Electric (16 1/8) built up a c1.istri'buttODcU area in errly 1946 the t in ictcC' cc 'lecli!le to 11. 1 10\1 of 12 . Cos re.chc( in licy of this 'ecr. l' larGe yJotcntil br.se arEo.n has bc.cn built UP in the 12-1(, rec thG.t ,oul( inicute a lone ter. objective of 36, i.L 'he 'Ir(.e is' penctrtE;' upsi(e. There is ne,,-rcr terl resist nce in tle 24-27 ..ree. 11th ,,-t 84 1/4 Atchison, Topeb., cn( Sent Fe -long lith four other rd1 issues b(e9c2) u6.e,,-6orf tchoeD lenc;ec' on inrovco Decelber technicd ,ction of tJ1C r ilroC oup. t ,Jon.ys closir.f, of 92, the stoci, he penctrc.ted the July hieh m' the nec.rcr ter. in -icr.tion is th 104,-110 ren. T.! lon'er ter; pattern is c.lso favorble. Decenber 22, 1947 ED.urJD \.. T,.BrLL SHIELDS & COMP1,NY The opinions expressed In lhis leHer are the personal Interpretation of charts by Mr. Edmund W. Tabell and are not presented as the opinions of Shlolds & CompaOy.

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Tabell’s Market Letter – December 31, 1947

Tabell’s Market Letter – December 31, 1947

Tabell's Market Letter - December 31, 1947 page 1
Tabell's Market Letter - December 31, 1947 page 2
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Technical Market Action Just as no Christmas number of a magazine or periodical is cOr.lplete without a picture of Santa Claus, a snow scene or a holly wreath, no financial letter or service is complete, at this time of the year, without an Annual So let me add another prediction to the multitude that already have been issued. But before I start, I lIould like to fill in a little background. The market reached a high of 213.36 in the industrial average and 68.77 in the rails in May of 1946. The high of the industrials Vias considerably above the previous February 1946 high of 207.49, but the rail average just about equalled the previous February 1946 high of 68.42. This was the first cautionary signal because on all previolls rallies, since the start of the bull market in 1942, the rails had led the advance. In addition, many individual issues had built large potential distributional areas from Janu,.ry to May of 1946 while the public was scrambling for new at nny price. This letter tUI'l1ed cautious on the market when the 200 level VIaS penetrated and predicted the possibility of a decline t.o 174. The average react.ed to 193 then rallied back to 205 in August to broaden out the distributional area and indicate the possibility of a decline to the 170-160 area. The market started a sharp decline in September and rec.ched a low'of 160.49 on the industrials and 44.00 on the rails in October 1946. That brings us up to our prediction for 1947. In January 1947 \7hen the averages were 176, I was of the opinion that the market Vias in an intermediate uptrend that would carry to the 185-200 level. After that, I predicted a ree.ction and consolidation to be followed by another attempt at new highs later in the year. I also thou;ht that the rise \'1ould be extremely selective and would feature the heavy industry shares, oils, chemicals, etc. I did not like the action of the soft goods stocks puch as department stores, liquors, moving pictures and luxury as these issues had not yet reached their downside technical objectives. The actual course of the mc.rket did not quite follow this pattern. The indivioual issues recommended in most ceses, moved sharply higher, while the issues with unfavorable technical patterns worked lovler. HO\1eVer, the averages were able to reach only the lower part of our anticipated 185-200 range at 184.96 in February. The rail average reached ,3.65. This rully vms followed by a downdrift that carried the industrial average back to 161.38 in May. The rails reached a neVi low at 40.43. The subsequent rally carried the industrials to a new high of 187.66 in July but the rails, at 51.92, failed to better the February high. The industrials, in several attempts since that time, have failed so far to pene- trate the July high.of 187.66. The rails, however, recently penetrated the July high to roach 52.88 even though they were unable to penetrate the Februery high of 53.65. This j.s the first evidence of rail leaderShip in almost tVIO years. /NOV/, finally, the prediction for 1948. I believe the long and narrow trading range of the last sixteen r.1onths, between roughly 161 and 187 in the industrial average, is a base area that Will be Ultimately penetrated on the upside. The rail average also has a favorable technical pattern TIith six tops in the 54-52 area and a head and shoulders bottom pattern at, roughly, 44 in October 1946 for the left shoulder, at 40 in May 1947 for the head and 46 in December 1947 for the right shoulder. My reasons for predicting that both these patterns arc base areas are based on (1) the vast majority of instances that individual issues have reached the dormside objectives outlined by their early 1946 distributional area. They were not all reached at the same tir.1e. ChrJsler reached its downside objective .r.Th. opinion, in this letter .r., the personal interpret-tion of chert, by Mr. Edmund W. T.b811 and not presenhd as the opinions of Shields & Company. Technical Market Action -2- in October, 1946. Pennsylvnnia Railroad reached its downside objectave'during the pa&t month. (2) A great many important issues in both groups have already given individual bull market sienals of their own by penetrating trading ranges and reaching new high terri tory. It is true that other issues have reached new lows but these issues are just reaching the dOl'mside objectives outlined by the early 1946 distributional tops. Only in rare cases have individual issues reached their downside objectives earlier in the year and then famed a trading l'unC to penetrate it on the downsidejl' Thus, going ahead on the premise tho.t the trading ranGe of the last sixteen months is an accunr.lUlation area, what is the possible objectives fol' the averages on an intermediate upswing The present base patterns 210-215 for the industrials and 65-75 for the rails. This checks with objectives of around or slightly above the 1946 high of 137 on the New York Herald-Tribune 100-Stock average (now 122) and around the 1946 hieh of 149 on the New York Times 50-Stock combined average (now 116). This does not mean that all groups, or even indiVidual issues in the same group, will rise equally. In fact, the rise will be extremely selective. Issues that have reached their 101,5 earlier in the year and have already formed Sizeable b,,-se patterns will show bettern market action than issues that have only recently reached their d01'mside obj ectives and require backinG and filline in a trading range to form a base. The groups with the most favorable technical patterns at the moment include the steels, rails, issues, building issues, farm implements, machine oils, chemicals, papers und certain miscellaneous groups. I will endeavor to cover tho most interesting individual – issues in subsequent bulletins. Most of thorn are now in our recommended list of issues. I'AS timing of the upside penetration, that is uncel'tain. It requires a change in the or rather apathetic nttitude of the investor and speculator of today. If the penetrntion occurs pbortly, the out- lined above are a reasonable eXpectation. If these objectives are reached early in 1948, it is pOSSible, c.fter ceveral months of consolidation, that the I'larket may embark on a move into even higher territory bofore the end of the year. If the rise is delayed and the sink back into the 170-160 buying range, it will mean the enlargement of the base area and an even greater internediato t('rID objective then outlined above to be reached luter in the favor the possi- bility of a nearer tern penetr2.tion. In my next letter I will cover the fallacies which are apparent, in my opinion, in the current bearish prognostications. Decenber 31, 1947 EDMUND W. TABELL SHIELDS & COMPANY HAP P Y N E IV YEA R The opinion5 expressed in this letter are the penonal lnterpretation of cherts by Mr. Edmund W. labelJ nd are not presented as the opihions of Shields & Company. –

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