
Tabell’s Market Letter – March 25, 1960
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Walston &- Co. Inc Members New Ym'k Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABEll'S MARKET lETTER March 25, 1960 The Dow-Jones Industnals closed lower on Friday after reaching an intra-day high of 627.86 earlier in the week. The average has now spent almost two months in roughly the 600-640 range and could be in the process of forming a base pattern. At the moment, this potentlal base is not broad enough to indicate an extensive advance. Probably more time will be needed to broaden the potential base. My technical indicators gave short term buy signals at both the February low of 603.44 and the March low of 596.20, but as yet they have not given an intermediate term buy signal. This will also probably re- quire more time. My breadth-of-the-market index, which warned of the market top in- early January, 'nas-turnerupward, but not — upward trend. The downside count of the top formed by the highs of August and January at around the 680 level indicated, from a technical viewpoint, three possible downside objectives, depending on which type graph was used. One objective was 604. a second was 578, and the third and most pessimistic was 550. The first poss1ble downside ob- jective was reached at the February and March lows. Whether these lows prove to be the lows of the move is not yet certain, but improvemcnt in my breadth-of-the-market index would go a long way toward confirming this possibility. The rail average has had a sharp recovery from the March low of 137.63 to reach 147.37. This average reached the top of the 137-133 downside indication of the d1stri- butional top formed early in 1959. The rail average is now running into heavy overhead supply in the 145-160 area and 1tS action from here on should give some clue as to the ultimate possibihty of pushing through this overhead res1stance. The utility average has been the best performer of the three. At this week's high of 88.83, the utility average was back to the January fj1is is quite re- markable when it is remembered that the January Jgh in t e tr' average was 688.21 and Friday's close was 622.47. Also, a as the only one It ' 111. well its Actually, the price interest. Harold X. in a recent talk. Despite th a e more or less of only academ1c rJJ p, Inc. pointed this out very neatly average of thirty industrial stocks at 625 is 100 r in the industrial e e high of 525, sixteen of the thirty stocks their 1955-1957 tops. One is as much as 500/0 lower, and all six lower by an average of 200/0. In fact, only e1ght of the thirty stocks hav a y acted better than the average itself smce the 1955-1957 highs, and only four e really accounted for most of the rise in the average. They are General Foods, Eastman Kodak, Procter & Gamble and American Telephone & Telegraph. Proper selection between two stocks would have been the difference of 1000/0 profit and a 500/0 loss if both stocks were bought at the 1955-1957 highs. Regardless of the movement of the various averages, indiv1dual selections of . stocks w1ll be cf considerable importance in a market that will probably hold in a rela- tively narrow price area for quite some time to come. I envision a possible 700-550 range for the Industrial average for the next few years, with individual issues and groups showing diverse action. Ab1lity to find these issues and groups will be much more 1mportant than the ab1lity to forecast the swings back and forth in the averages. In the letter of March 11th, the groups thaLhave acted better than the market smce the September lows. You will note that most of the groups fall into two categories. The first category includes electronics, radio-TV issues, elec- trical equipment and office equipment. These are mostly glamor type groups in new industries with a vast growth potential. They are 'all selling at high price-earnings mul- hples. The second category mcludes telephone, soaps, soft drinks, food, tobacco and utilities. These are more or less defensive type'lssues selling,in most cases, at rela- tively reasonable price-earnings ratios. In the March 11th letter we also listed the groups that have been acting worse than the market. In this category you will find steel, automobiles, aluminum, oils, papers, rubbers and chem1cals. It is interest- ing to note that many of the m the Favonte Fifty of institutional investors are to be found in these groups. This might indicate an important switch in mvestor preference. ' ED1V1UND tV. IABELL llTrrod and ner-e'r'n'i's &'t.. lS to be construed as. an offer to ;cll or 11 solICitatIOn to buy any seCUritIes referred to herem The InformatIon iU!t.d'nhcuracy or completen(ss and the furnishing to be construed as, n represcntn. Alll'W,SSIJ1t1J1 of opllll!)n are subJect to change wlthouPMIhl'-\Vntl3'(dti &-.xco. M, aM'IOfflters. Directors, Stockholders and an lllterest In the securities mentIOned herem ThIS '!arket letter IS mtended and presented merely ns a genernl, on day to day market news and not as a complete analYSIS Addlltonal Information With resPect to any securities referred to herem Yufni!!il1'!d