Tabell’s Market Letter – July 20, 1951

u,'r,r,,,';',7'1, '' Wolston.Hoffnl0n Goodwin f ,, , ,;f;;';;';'!'';;1i1iI (-Y–/PPi.r'4Mn.enC (-J. et;cenUed Ifq ,/! , , NEW YORK 5, N, y, 35 Wall Street DIGBY 44141 PHILADELPHIA 2, PA 10420 Walnut Sheet PENNYPACKER S 5'17 TABEll'S MARKET LETTER .t , , LOS ANGELES 13, CALIF, SAN FRANCISCO 4, CALIF. 550 South Spring Street 265 Montgomery Street MADISON ')132 sunER 12700 'I,,-'I i \' ;( 'C ,1, 'J IlJi,'t'J,..7' ,;-.' , ,i/ii'l 'f!.,, ,.1 F\.1 ' U The market spent the entire week in a narrow trading range just a shade;i; te,below the heavy upside resistance at 255-257. The potentially dangerous ;pead and shoulders top formation still rema1ns intact in the industrial ,average. The rail average rallied to a new high for the move at 77.53 on ';; \1; t 1,,;J;;'riday and is approaching the 78-80 supply. k! \ t Because of the uncertain technical pattern of the general market, this t .-.letter has adopted a rather cautious attitude. As I have mentioned many 'ft.; ;tlmes before, individual issues and groups have extremely diverse patterns ;;With different issues in different stages of technical development .For this t .-reason, while suggesting no change in long term investment accounts where ;';j ,,return is paramount, I have suggested a partially liquid position in capitalt;- ppreciation accounts with 50 invested in issues with favorable long term ; technical patterns and 50 liquid awaiting buying opportunities. !;; ,l Perhaps a short explanation of what I mean by favorable and unfavorablei,;; ,technical patterns is in order. Stocks very seldom move very far in either r;,'\ 'direction without first gOing through a period of accumulation or distribu- ;; ;n ';tion. The reason for this is obvious. For example, if a stock has declined because of poor earnings or unfavorable outlook, the reasons that caused ,r7' ,the decline seldom disappear overnight. There is usually a period of uncer- t'r ,tainty during which time the stock ceases to decline but consolidates and f;;l V;backs and fills in a narrow trading range as sufficient buyers come into ;,the market to take care of the discouraged sellers. This is the slow tire- H .,' s , om e period of accumulation or formation of a base for an advance. It \1; /, usually is the first or preliminary requirement before a worthwhile move. )(' kThe second stage ot technical development is when the stock breaks out of ; its base pattern and starts to advance. The third stage is when the stock ;',;!, ' reaches its upside objective or high. The ,fourth stage of technical develop-I;;, ment is the formation of a top or the period of distribution. It is the ;,;;;, ,'opposite of the first phase of development. It is usually accompanied by 1-;; 'extreme optimism and consumes a shorter period of time than the accumulationt,i , phase. The fifth phase is the declining period as the stock breaks out of 1,,'',1 its top formation. The sixth and final stage is when the stock reaches its V,, ',downside objective or low prior to the long tedious period of re-accumula- i i. tion. Of course, the pattern is not usually as Simple as that outlined above .f!.;;',,.,'; ,various short term moves often confuse the situation and sometimes make it 'f'z; ,- difficult to be certain at just what stage of technical development each stock may be. nIi'; c , In the present market we find groups and individual issues in all the kV ',various stages of technical development which explains the diverse action ', ;,oionfutttlhhineeepfoiarfsst sto,smisxeecomonfodntthahensdmansodirxetthhime spvtoaargrteiaesndthgoavruoetulopfoaskvofofrolalbrolweth.GeteecmnheornnaitLhclsaylasphpeeaaattdke.irnnAgs, basrtniodecfki'tl;)i those in the third, fourth and fifth stages have unfavorable patterns. , The industrial average appears to be in the fourth stage while the rail,/ 'average appears to be in the last stages of the fifth phase and approaching C, the sixth, and the utility average appears to be in the first phase. ;, ;' AIRLINES are in the second stage. AUTOMOBILES are in the fifth.BUILDING;,, ;'MATERIAL stocks are mainly in the first and second stages. CHEMICALS are ;scattered among two, three and four. COPPER and METALS are mainly in the ;, ifourth stage. ELECTRONICS and TELEVISION are ma1nly 1n the first phase with;;',' –B. few in six and the last stages of five. MOTION PICTURES are almost all in'c ,the first phase, as are OFFICE EQUIPMENTS. OILS have very diversified pat- 1,, 'terns within their own group with individual issues to be found in the second, third and fourth phases. PAPERS seem to be mainly in the fourth .'stage. STEELS are in the fifth phase. ;;'j' F .-July 20, 1951 EDMUND W. TABELL WALSTON, HOFFMAN & GOODWIN ;;'1;' ,f)' , ' Closing Averages f,' , Dow-Jones Industrials 253.73 Dow-Jones Rails 76.83 ;' ,-,,'/ , I \I This memorandum II not to b. construed a. an off.., Of IOlicltotion of offer. to buy or lell any 'tUflties From tim. to tim. Walilon, Hoffman & Goodwin may , have an lnte,nt ill some or ,II of the ,.curltiu mentIoned hr,l The for'90ing matenal hu been prepared by u, II m5ttu of Information only. It i. baMid , , upon information b,II…d ,..1I,bl, but not neelnarll.,. compl,te, I. not ;uarantaed as accurate Of final, and is 1\0' intended 10 foredo Independent inqulfY. ;', I , , ,,;– ,;' ' '1' 1',;V!;fi,I';PrX!2i''/Zl;,'i.,nf,'Y,', /) 2'/''F 7; , 7/ ' ', ';, 1 'I ,. !;;' \- .' , – , ,- ' — ''-'' –'–1, -)-',I';,, -t(,'f , ;'ir'-',J)…, 1