Tabell’s Market Letter – May 11, 1962

Walston &Co. Inc Mernbe,'s New YOTk Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA OFFICES COAST TO COAST AND OVERSEAS FILE COpy TABELL'S MARKET LETTER May 11, 1962 The market, in our opinion, has entered a broad buying area. Our technical work has indicated for some time that the 650-605 area in the Dow-Jones Industrial Average was the down3ide objective of the distributional top pattern formed in the 740-720 area during the past year. At the week's intra-day low of 637.45, the Industrial Average had entered the upper part of this 650-605 area. Just how deep into the area the average maJ carry is not ascertainable at the moment. However. the market has now entered over- sld territory on one first Octobex, – Also, an increasing number of individuaIStocks are -reaching or are close -to downside– objectives on our technical work. These last two factors suggest to us that the correct market policy at the moment is to buy on balance on weakness. We would not follow strength until our breadth index reverses the downward trend that has been in effect sinc Maya year ago. The breadth index reached a new low this week along with the averages. The start of a broad advance will not be signalled until the breadth index begins to act better than the Industrial Average. Before this happens, the average will probably have to back and fill within the broad confines of the 650-605 area for a considerable period of time in order to form a new base pattern. Contrary to general opinion, a broad advance does not start from the initial rally after a selling climax. Worthwhile advances of long- term or intermediate-term significance usually start after a period of investor discourage' ment and low volume. 'Nhat stocks should be bought when the Industrial Average is in the 650-605 range, There are two alternatives. One is to buy stocks that than the market. This is the policy that this letter has followed for a long When we were cautiou on the general market. Last August, we suggeste!att' s ion of funds in short-term bonds for liquidity, but to keep the bal nv e' situations showing -p-otentials were-reached. resulted in a profit. 2'1.-e U h sales ,ve — when in-r9-61 of which fifty three This to the intermediate-term trader in- terested in ap etrod of six months or longer as well as the long term investor. e r e is to buy stocks of good investment quality that have been acting s th arket but have reached or are near long term downside objectives. Issues have reached new lows for a long period of time. Even if these issues are ased at what turns out to be the low, considerable patience may be required before price advance occurs. Usually, a lengthy period of con- solidation is needed before a new base is formed. Situations of this type are more suit- able for the long term investor who is satisfied about the long term fundamental value and investment quality of the issue. The chemicals are a case in point. Many of these issues reached their highs in 1956-1957 and have declined 300/0 to 500/0. From a technical viewpoint they appear to be at or near major downside potentials. A list of some of these issues follows, together with technical downside objectives and the approximate high reached since 1956. Downside High 1956-1911- Downside High – PrIce Object. 1956'-19Si- – Allied Chem. 43 42-40 67 Monsanto ,4 45-40 69 Amer. otash 43 40 66 Olin Mathieson 33 32 62 Atlas Chem. 18 18 30 ryennsalt 35 30 45 Diamond Alkali 48 50-48 75 Stauffer Chem. 39 40-35 70 Dow Chemical 51 55-50 100 Union Carbide 100 100-90 144 Hercules Powder 42 42-38 55 U. S. Borax 32 30 77 Dow-JoYles Ind. 640. 63 Dow-Jones Rails 24 EDMUND W. TABELL WALSTON & CO. INC. ThiS market letter Is not. and under no circumstnnces 15 to be construed as, an offer to sell or R 8olicitatlOn to buy Rny securities referred to herem The mformatIon contained herem is not guaranteed as to nccurocy or completeness and the furnlshmg thereof IS not, and under no Clrcum!\tnnces IS to be construed as, a representa- tion by Walston & Co, lnc All e'lpresslons of opinion are suhJeet to chanltc w1thout noticc Walston & Co, lnc, and Officers, D1rectors, Stockholders and Employees thereof, -purchase, sell and may an mterC'lt 1n the securltlC mentioned herem market letter mtenrled and presented merely as a general, mformll,l commentary on day to day market ncwa nnd not as a complete anaLysis AddltlOnal information \I,lth lcspect to any SCCUrItIes reicrre,1 to hercm wJil be furnillhed upon request. .' . \\ N 30l