Tabell’s Market Letter – July 17, 1959

Tabell’s Market Letter – July 17, 1959

Tabell's Market Letter - July 17, 1959
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Walston &Co. —–lnc —– Members New Y01'k Stock Excw,nge NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABEll'S MARKET lETTER July 17, 1959 Uncertainty about the duration of the steel strike will probably call a temporary halt in the recent stock market upturn and result in a broad trading shelf in the averages for a period of time. During this period, individual issues will pursue their own In,C1epe,nc1t' ent courses as dlctated by earnings, new developments, etc. As far as the averages are concerned, the Dow-Jones Industrials will probably meet support at around the 650-640 level as compared with the recent high of 668.26, and the Rails should meet support m the broad 170-157 area in the Rail average in which they have held for SlX months until the recent mild upside range in both 'averages penetra vllll be toionnln. e'Tuphseideevewntiuthalsehmoret-r'g1eenrmce't1omf tihngis-dceopnetheamehptla'otend trading ments on the labor front. During the current irregularity, I would add to holdings in groups wlth favored long term techmcal potentials and showing the best relative strength patterns at the moment. Such a classification would include selected issues in groups such as airlines, aluminum, chemical, coal, electrical equipment and electronics; liquor, machmery, meat packing, movies, railroads, soft drinks, steel and textiles, and other miscellaneous issues mentioned m my various technical studies. To many investors, the past two or three years have been puzzling ones. It has appeared that on the basis of all traditlOnal yardsticks, the stock market is terrI- fically overvalued. Perhaps a look at the broad pattern of growth trends, market evaluations and price movements might be of value in clarifying the present positlon of the market. The long term major trend of our economy, and, therefore, of stock prices, 1S toward higher levels. This basic trend will remain in force as long as America continue to grow and there is no reason to believe that there IS long term concept. The investor who has continuously investwl, in t e n st cks of a broad segment of American industry has fared very well Unfortunately, this long term upward e rs in s prices has not been t-li-ne progr-ession. ,.rheI'e-have be ions to a lesser extent, 1946 and 1957. Th i t pt ,and subsequent advances, can- – If these yardstlcks were the 1 movements, all the successful inve would need a Stock p e e a dtling machine. c y four factors. Three of these are fundamental and basic. Theyaree i s, i' nds and money rates. The fourth factor, and sometimes the most important, s v mtang1ble. It is a thing called investor confidence. Investor confidence IS that i Ible thmg that makes a stock earning 5.00 a share sell at 125. a share, or twenty-five times earnings, when investor confidence is high,and makes the same stock still earning 5.00 a share sell at 35.00 a share or seven times earnings when investor confidence is low. Investor confidence is impossible to measure by figure It is an emotional something that cannot be put down on paper. Perhaps the be st app to how investors feel at a given time period is by watching the technical action of the market. That is why I maintain a library of 2000 graphs of individual issues and breadth- of-the -market studies. At the moment, investor confidence is extremely high. Immediate earnings and dividends are not important. Many stocks are selling today on the basis of what they will earn several years from now, and the investor is confident that earnings will be higher. This confidence has not'always been with us.-In th-e period, blue cnip issues like General Electric sold as low as seven times earnings to yield over 7. Earnings were improvmg, but investors did not believe the improvement would last. Investor confidence was low and everybody was waitmg for the usual post-war depresslOn that never happened. Technical market action durmg the 1946-1950 period built up the huge accurnulatlOn patterns that resulted in the present rise. At the moment, investor confidence remains high. Until something happens to change this intangible factor, the stock market can and will move hIgher. As I have stated before, I believe the stock market is in the final phase of the advance that started in 1949. There are no technical indications as yet that this final phase has ended. Dow-Jones Ind. – 657.13 Dow-Jopes R.ails – 166 95 EDMUND W. TAB ELL WALSTON & CO.INC. ThiS market letter 18 not, and under no circumstances IS to be construed as, an offer to sell or a sohcltatlon to buy any secUrities referred. to herem The mformfl.tlOn contamed herein IS not tuarantcerl as to accuracy or compLeteness !Lnrl the furnlshlllg thlrcof IS not. and under no cIrcumstances is to be conatrued DS, a reprC'lentatlon hy Walston & Co, Inc All e..pre9Blons of OplTIlOn ure subJect to change 'Ithollt notICe. Walston & Co. Inc. nnd Officers, Directors, Stockholdera nnd Employees thereof, purchase, sell and may have an mterest ID the securlues mentiOned herem. Thla market letter 15 intended and prC!!ent.ed merely as a general, mfufronrlsmhaeld cuopmomn erntarey on qday touday mearkest newts a'nd not as a complero analyllis Additional lllformntlon with nSpect to any St'CUrltl(!S referred to herein WWNill 3b01e

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