Tabell’s Market Letter – October 02, 1953

– – – – – – —- – – – – – Walston &()o. MEMBERS NEW YORK STOCK EXCHANGE AND OTHER LEADING STOCK AND COMMOOITY EXCHANGES NEW YORK PHILADELPHIA LOS ANGELES SAN FRANCISCO LUGANO (Swih.d,nd I OFFICES COAST TO COAST CONNECTEC BY DIRECT PRIVATE WIRE SYSTEM TABELL'S MARKET LETTER October 2, 1953 The market appears to have regained its equilibrium and the past week's session was an orderly one. Both averages continued their moderate .advance followed by a consolidating period later in the week. As I have said before, I believe that the market, despite the action of the averages, has been in a re-adjustment period for two and a half years. While the industrial average only reached a high of 264 in February, 1951, many individual groups and stocks reached their highs at that time ,and have been in a downtrend ever since. At each successive high in the averages of 277 and 281, reached in 1951 and 1952, and finally 295 in Janu- ary, 1943, more groups topped and joined the downtrend so that the average group has been in a decline for two years regardless of the fact that the averages only reached their high early this year. I expect this re-adjustment to continue for a while longer — possibly well into 1954. The technical pattern of individual issues suggests that while many have reached or approached buying levels, they may have to spend considerable time in rebuilding base patterns before a long term advance is . indicated. A number of groups still indicate moderately lower levels while other groups still remain in an uptrend. This selective pattern is not new. tt has been the pattern since February, 1951 and we may have to go through more of it before the base is formed for the broad advance that I expect will occur in the last five years of the present decade. In terms of the averages, if this means anything, the present inter- mediate term advance should continue for a while longer to possibly the 275-280 level. It might top out in November or early in the next year, de- pending on the amount of tax selling and shifting. It may be followed by another decline. Whether the average will actually fall below the 254.36 low of September is problematical and not too important. Certainly, indi- vidual issues will make new lows. However, from a technical point of view, it appears that even the issues that still indicate somewhat lower levels have witnessed the larger part of their decline. What type of stocks should be bought today Should you buy the blue chip issues that have suffered only a mild decline such as Union Carbide, 'General Electric, National Lead, International Paper, Scott Paper, duPont, . General Foods, etc There is something to be said for the purchase of this type of equity. They have shown excellent technical action and still indi- cate higher levels. They are the type of issues that are being bought by institutional investors and, of course, that is why they have shown above average price action. Furthermore, they will not face the problem of year- end tax selling. Or should you buY the issues of above quality but which have suffered rather severe declines from their highs Issues like Deere & Co., American Cyanamid, Food Machinery and American Viscose come to mind. There is some- thing to be said for this procedure too. From a technical point of view many issues of this type have reached or are approaching their downside objectives. Many of them are selling at historically low levels and, at present dividends, are offering good yields. However, on the unfavorable side, they may need considerable time to build up re-accumulation patterns. It appears that they should not be bought on strength but rather during periods of market decline. They could be subject to year-end tax selling and shifting. It appears that the wiser policy may be a combination of the two. Purchase of the better-grade equities on minor weakness is recommended. Would also use a portion of available funds to slowly pick up the more cyclical issues during periods of market weakness. Would also keep a por- tion of funds liquid to take advantage of possible later buying opportunities in issues of this type. , .' EDMUND W. TABELL WALSTON & CO. This may memor1ndum is not have an int.,.d in tsoobee construed or .,1,' of as an offer or solicitation of offers to buy or sell 'Iny securitlu From time to time th. lecuritiel me.ntioMd herein The fore90lng material has been prepared by,! Wahton & Co, as a matter of orrnfarnmy aphaorntnoernlytherIet oif b,lISed upon Informotlon believed reliable but not necenolHlly comPlete, IS not guaranteed as accurate or finol, and Ii not Intended to foreclose Independent inqLmy