Tabell’s Market Letter – January 15, 1960

/- FILE Walston &Co. —–Inc —– Members New York Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER January 15,1960 The market declined sharply on the first three days of the week and regained only a portion of the losses by the end of the week. At the week's intra-day low, the Dow-Jones Industrials reached 653.11, which is a declme of over thirty-five pOints from the all-time high of 688.21 reached on the first trading day of the new year. The decline in the Rail average was less severe. From a high of 160.90, it declmed to a low of 155.51. Referrmg to my letter of December 30th, it 1S a discouragmg fact that the DecemJ;ler 10ws..9f 658.48 .on the R'LI'Jopes the Standard&- Poor's IndustriafIndex were both January 12th, the earliest in the past twenty-five years that such a breakout has taken place. The low of the previous De- cember was broken in twelve of the past twenty -four years. In each case, the down- side breakout occurred in the early months of the year, mostly in January or February. In most cases there was a fairly substantial decline from the earlier h1gh of the year. In the worst case, it was 46 1/2/0 in 1937. In 1956, the subsequent decline was only 5/0. The average of the twelve years was a decline of 200/0 from the high to the low. However, the sharpest declines were in the seven cases prior to 1947. In the five declines since then the average decline from the high to the low has been 12/0. In seven mstances, the market closed lower on the year, but in four cases a subsequent rally from the lows resulted in a higher closing for the year and in one year the market was unchanged. In the worst decline (1937) the market fell 43/0, and in the best of these years (1938) the market was able to record only an 11/0 advance. These flgures are all based on Standard & Poor's 0 On the more encouraging side of the mar;Mt w s th the Rail average. I mentioned this in last week's letter ont' a to show above average action during the past week. The rails hoi; a portlOn of their advance from- the December-31 st–1owof-15 thWa y-4th' hlgh-of-1-60790 .'—'. This, of course, is only or sitlve action would be the ability to push above the high O\JIh nt technical pattern of the rails is most interesting. It 1S 1t is possible that the pattern has long term 'v Ab1lity to hold around present levels would glve indic '0 to tltude toward this unfavored group might be changing. There 1S, of rse, no change as yet in the breadth-of-the-market action which has be giving unfavorable warning Signals for the past few weeks. Until these indications change, I would contmue to adopt a very cautious attitude toward the market and lighten commitments on strength. It is also imp0rtant to watch the relative strength action of each mdividual group. During declines like the past week important clues to the identity of the leaders of the next rallymg phase are quite often given. The stocks that show the best downside resistance or relative strength',even though they are declining, are more often than not the leaders of the next advancing phase. For example, in 1957, durmg the early stages of the decline, the favor- able relative streI1gth of gr2'lPs as the food, chai);!!!, foods and tobaccos, indicated that they might be the leaders of the next rallying phase. It mIght be a bit early to select comparable groups for the present, but if the favorable relatlve strength of the rails continues, they will be among the candidate s. Dow-Jones Ind. – 659.68 Dow-Jones Rails – 157.98 EDMUND Vl. TABELL WALSTON & CO. INC. This market letter IS not, nnd under no circumstances 15 to be construed 8S, an offer to sell or a sohcltatlOn to buy any securities referred to herem The mformatlOn contamed herem 18 not n.s to nccuracy or completeness and the furnlShmg thereof IS not, and under no Clrcumsto.nces IS to be sonstrued as, a representa- bon hy Walston & Co. Inc All expressIons of opmlOn are to change WIthout Walston & Co, Inc., and Officers. Directors, Stockholders and Employces thereof, Pllrchn'le, sell and may have an mterest m the securltJes mentioned herem ThIS mnrket letter IS mtended and presented merely as general. \vUmformal commentary on day to da)o market ncws nng not as a complete analYSIS AdditIOnal information With respect to any secul'ltJes referred to herein I furnished upon request.