Tabell’s Market Letter – May 04, 1962

Walston &Co. lnc —– Members New York Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHlCAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER May 4, 1962 At. Tuesday's intra-day low of 655.14, the marJ.-.et became at least temporarily oversold. There were 959 declining stocks on Monday and only 182 advances.' This cli- mactic action had been preceded by 837 and 73B declines on the two previous days. Volu on the decline increased to over four million shares on Friday and Monday, and reached 5, 100,000 shares on Tuesday. The decline carried down very close to the top of the 650 610 area which, in our opinion, is the lowest possible downside objective indicated by te h nical work. The breadth index, which has been in a downtrend for a year, obviously reached new low territory. However,- this index, whiCli-haS15een-actingworse- than the market s'ince May, is now acting like the market. This is a necessary prelude to better- than-market action. Of course, no long-term trend change for the better has yet occurr This will take further time. Since Tuesday's low, the Industrial Average has rebounded back to an intra-day high of 679.20. r,Tormal technical action calls for a one-third to on – half retracement of the 72-point decline from the March intra-day high of 727. 14. This would call for an advance to 679 to 691, which has been about reached. Drobably at least a testing of the low is needed before a turn in the long-term trend is indicated. This letter has been cautious since last Summer. We envisioned an extremely selective market with a minimum upside objective of 725 and a possible 750-775. A high of 741. 30 was reached in November. Cn the downside we could see a possible 650. Of more importance, we felt that individual issues could show extremely diverse action with some issues acting much better than the market and others much worse than the ma – keto Our recommendations were concentrated on t better-than- market action and we advised avoiding the glamour and 0 I 1 soes selling at extrem high earnings multiples. Thoughts were s 11 n n ength. The decline in the market has changed our Qifing. -e uld now be inclined to be a buyer on weakness. The rally 's y nlar the potential top from 650 0.Q the Dow–Jo.!1esndllstrlal average to 65 .1 It 1S rely.possible-that the average will work somewhat lower, but in lIcks we have probably seen the wors of the decline. We cannot bear market at the moment. The mar- ket became technically vulne b e ridiculous overvaluation that occurred in a great many iss s r 1 1 has slowly been correcting itself for the past year. The cor . climactic phase. Usually, the market has to find a reason for a neede e nic orrection. The U. S. Steel-Kennedy fiasco was as good a reason as any. If it a been that, it would have been something else. Only a some- what unusual news nt was needed to tip the balance. As far as individual stocks are concerned, the market breaks down roughly into three patterns. In the first group are issues that stiU indicate fairly substantial declines. This group is growing smaller. In the second classification are issues that have declined substantially and have reached or are close to downside objcctives. These issues may need a long time to base out and it is probably wiser to wait until their technical action improves. These issues, however, should be attractive to patient, long-term investors provided that the fundamentals are attractive. In the third category are the issues that I have acted better than the market. In most cases, these issues'have already built up I substantial base patterns over a period of time and are in a position to move ahead when, the market climate improves. A list of twenty-two stocks that, in our opinion, fall into this category, was included in last week's letter. They should-be bought during periods of market weakness. In addition, we mention Cluett Peabody (43 1/4), Ex-CeU-O (44) Murphy Corp. (23), 1\orthern '''acific (37 l/B) and United B1scuit (44 5/8). Allor-these issues are on the recommended list. Would also add Container Corp. (26 7/B), Libbey- Cwens-Ford (541/2) and National Acme (553/4) on market weakness. For long-term speculation we suggest Chrysler Corp. (51 l/B) and Eastern Airlines (23 5/ B. Dow-Jones Ind. 671. 20 Dow-Jones Rails 140. 68 EDMUND W. TABELL WALSTOi\T & CO. INC. ThiS market letter IS not, and under no circumstances IS to be construed as, an offer to sell or n soitCltation to bu)' nny sccuntJes r.cfcrred to herem The mformatlOn contained herem IS not guan' ntced to accuracy or completeness and tIle furmshlllg thereof IS not, and under no ell cumstances IS to be c(lTI!.trued as, n tlOn by WnistOI1 & Co Inc All (',,preSSlOns of opmlOn arc ,ublect to Without notice \Valo;ton & Co. Inc, and OffIcers. Dtrctors, Stockholders and Fmployees thereof Bell nnd may have an mterest In the securltlC mentioned herem ThiS market letter IS intended and prescti merely as n general, on da to fillY market news and not as a complete analYSIS AddltlOllnl Information Jth rC5)lCct to anY' securlhes r(,lctred to herein Will be furnished Hilon rCfluest '\'\ 11 301 ————)