Tabell’s Market Letter – October 23, 1959

Walston &Co…..——-Inc…..– Members Y01'k Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER October 23, 1959 Last Friday's strength, based on hopes of a steel strike settlement, proved pre- mature and the Industrial average drifted back into the trading area in which it has held since early September. This week's low of 624.55 compares with the September low of 613.30. From a technical viewpoint, a break below that level on volume would be quite discouraging and would destroy the potential base area that has been building up since early September. It would mean that a new base must be formed at a lower level before the advance is resumed. However, several breadth-of-the-market indicators point to the probability that the September lows will hold. Volume has failed to pick up during periodsof price weakness.'The- heaviest downside'volu,me-was during-the first-phase 'of — . the decline in August when volume on one declining day was above the 4-million-share mark. Also, the drop in the total volume of trading has been brought about almost en- tirely by a drop in buying volume. Downside volume on a ten-day moving total basis is very close to the lowest point reached in 1959. Also, the figures on new highs and new lows are encouraging. The number of new lows was the highest since October, 1957 during September, but has dropped to a point where it is not much above the number of new highs. Probably the most encouraging potential is the sharp pick-up expected in the business pattern when the steel strike is definitely settled. Leonard H. Lempert of Statistical Indicator Associates of Great Barrington, Mass., has some interesting comments on this subject. This company's Statistical Indicator Reports have been ac- curate in forecasting business cycles. The findings are based on the action of twenty- one business indices. Some of these indicators are leaders in the sense that they usually lead the business pattern and change direction does. Another portion of these twenty-one indices are coWiiden i ge ral business pattern and move with it. Another portion are ge ection after the general business has changed its trend. Mr. October 21 st report th owing to say in his '0 A comparison of recent ' t — at the time othe -f956 steeC strike is helpful in our indicators had been under wa a neral, downturns in the leading followed by weaknesses in several of the COincidenbit'nd'C the cyclical ups or he' 1956 strike began. Moreover, by July 1956, d ay for twenty-two months. Weakness in the lead- ing indicators at t s . is virtually simultaneous with the strike and with similar weakness in he cident indicators There is no indication at all of the sequence of weakne 'rst in the leaders and then in the coincident that would char- acterize the beginning of a cyclical downturn. On the contrary, their concurrent weakness is typical of a temporary event, outside the stream of cyclical developments, which is strong enough to pervade the entire economy. Even with signs of a recession already apparent by July 1956, the rebound from the steel strike postponed its beginning by nearly a year. This time, the strike was preceded by an upswing that had only lasted fourteen months and there were no signs prior to the strike that its end was in the offing. Furthermore, the greater length of the strike this time has depleted Inventories considerably more than in 1956. Consequently, many more months of hlgh level activity are expected between the end of the steel strike and the beginning of a recession. The recent general market weakness has brought some issues down to more attractive buying levels. The aluminum stocks have been unsettled by a price cut in a type of aluminum sheet and have declined to support levels. Kaiser Aluminum (51 3/4) and U. S. Foil B (62) are well below their highs and close to support levels, Aluminium, Ltd, (33 1/4) also is attractive. Am erican Viscose (42 1/8), showed nine-months earnings of 4.48 on a consolidated basis and appears undervalued. Electric Storage Battery (50 3/4) is down from its 55 1/2 high and is recommended. Fansteel (64 1/ 2) contmues to show constructive action. Cluett Peabody (56 5/8), Great Northern Paper (50), West Virginia Pulp & Paper (47 3/4), and Singer Manufacturing (49 5/8) are othe'r favored lssues. JnternatlOnal Packers (22 1/4). reached a high of 23 3/8 during the week. It was 16 1/2 a month ago. It still has a higher potential and should be bought on dips. I also like Kaiser Industries (15 5/8) EDDaIIND jM TAREI.! ll'ft\ Or7umstancas lS to be construed as, (In offer to 'Sell or or complctenl.!'ls and the furntshlllj.( thereof II IS snooltk'\raJf!l&1t uIn!'.a,Qer'qniolc)Nlrc-umlltnlL(!CS s1;) herem bectnstrucl The mformabon as, n represent.!- of oPInion Ilre subJect to change WIthout nobee. WnlstQn & Co. Inc, and OffIcers, Directors, Stockholders and lmployccs thereof, purchnae, sell and may have an Interest Tn the sccUrttJes mentIoned herE'ln ThIS market letter IS lntendoo and presented merely as a general, 11Iformal I'ommentnry on day tQ ,Jay market news and not as a complete annlysls. ArldltJonal mformatlOn ….. ith rCpect to any securities referred to herem WIll be furnlshl!l upon requ(qt \\ X 301