Tabell’s Market Letter – July 27, 1956

— NEW YORK -W–a-lIsntocn.-&-C-o. Members New YOTk Stock Exchange PHILADELPHIA' LOS ANGELES SAN FRANCISCO BASLE (Sw,hl.nd) OFFICES COAST TO COAST CONNECTED BY DIRECT PRIVATE WIRE SYSTEM TAB Ell'S MARKET LEnER July 27, 1956 The overhead supply at the April and May tops of 524.7 and 519.80 halted the Dow-Jones industrial average at Thursday's intra-day high of 517.62. The presence of this overhead supply was evidenced by the fact that for nine successive trading days the industrial average closed in a range bounded by 515.85 and 512.98. News of the nationalization of the Suez Canal brought some nervous profit taking into Friday's session and the average reacted to a low of 507.85. It is only normal to expect some technical correction at this pOint. The industrial average rallied from the late May low of 463.85 to 517.62, an advance of over 53 points in about two month&. h normal retracement -of a third-,to –a- half o-f-this—a.dvance to the 500-490 area would .be in line with standard technical procedure. There is a strong support zone at 490480 that shoulj halt any normal technical correction. It would need news developments of a drastically adverse nature to push the market much below this support level. From a longer term fundamental and technical point of view, there is no change in the generally constructive pattern. The possible price action of an average consisting of a small number of leading companiee is in no way indicative of the possible price action of individual issues. However, I have just completed my.semi-annual technical appraisal of the price action of over a thousand listed issues. These will be available for your perusal at Walston & Co. offices sometime during the next week. In it are the possible advance potentials in the event of a generally favorable market and the possible decline potentials in the event of a generally unfavorable market. The stocks that have readable patterns indicate an upside potential that averages 57.1. downside potential is 17.4. Translating this into terms of the Dow-Jones industrial average, the projection of the present pattern indicates a possible potential of 790-800 on the upside as against a downside potential of 430. The projected potentials are, of course, for the next several years. It is interesting to note that the possible downside potential is at just about the October low point reached after the announcement of President Eisen- hower 1 an-d isrelatlvely'Sma-L1–when–'C'ompared -to -the-p-o-s-si-b-le – upside potential. It would appear that, at the worst, the market might hold in the broad 525-430 range for a longer period of time. However, if this happens, the accumulation base might be widened sufficiently to in- dicate even a higher upside potential. As mentioned in a previous letter, the next six months or so may be the last opportunity to buy stocks in the broad 525-430 level prior to an advance to a higher plateau. This price pattern will not apply to every individual issue. The selectivity of the past several years will continue and even grow stronger in the future. Owning the right securities will be much more important than the price action of various averages. At the moment, favorable relative strength action is being shown by the following groups Airlines, Cements, Drugs, Natural Gas, Machinery, Metallurgical, Steel, Rail Equip- ment, selected Rails, as well as individual issues in other groups. Most of these groups are already represented in our recommended list, but would add tbe following to the list in the event of near term market weak- ness. Friday's Close Buyinl1; Range Carrier Corp. Crucible Steel Illinois Central Kansas City Nerthern Pacific enn-Dixie Cement Rayonier Scott Paper United Airlines 57 55 3/8 65 86-l/2-41 40 1/8 41 7/8 72 1/4 41 3/4 57-55 64-62 –8583 40-38 39-37 40–38 40-38 This replaces our buying list of June 1st. EDMUND VI.TABELL \!UlLSTON & CO. INC. This market letter not. Ilnd under no is to be cOn'ltruN as, an ofTer tn (';cll or 11 soltCltntion to buy any sccunhC' referred to herean The miormlltJon cont,lInl.(1 hcrem IS not gunrnnteed us to accuracy or comflleteness and the thcreuf I'! nM, und under no Circumstances IS to be construed as, a representatiOll hy \Vah'ton & Co Inc Ail e'ltJ)rcsslOns of otHniOn are subJect to change Ithoui notice 'Wnlstnn & Co, Inc, or .my Officer, Director or Stockholdcr thereof, may nn mterest. the 'lccurlilC' menthllled herem ThiS market letter IS lIltende.\ I\IHI presented mrreiy liS n gcnernl. m!ormal commentary on day to day market news and not II'! u complete anUlysl9 Additional mrorm.J.tlOn WIth respcct 1u uny beCIlnheb rcfell ed to herem Will be furnished upon request WN 301 — – -l(ui.lii.W.W,.',i adila, i,