Tabell’s Market Letter – May 18, 1962

Tabell’s Market Letter – May 18, 1962

Tabell's Market Letter - May 18, 1962
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FILE COpy Walston &Co. lnc. —– Members New York Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CH.lCAGO COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER May 18, 1962 At Monday's intra-day low of 626.85, the Dow-Jones Industrial Average reached the middle of the 650-605 area which this letter has mentioned for quite some time as the downside objective of the decline from the November high of 741. 30. Two weeks ago this letter changed its overall policy, in effect since August, of selling on strength to buying on weakness into the 650-605 area. This policy should be continued. We consider the 650-605 range as a broad buying area. There mayor may not be some further weakness, but we would not consider it of great technical significance. There is a very good probability, our opinion7 that tl'ie' low inthe IndustriafAverage for on \I'onday. As mentioned in last week's letter, some of our technical graphs entered oversold territory late last week and an increasing number of issues reached downside objectives. Neither our shorter-term nor longer-term breadth indices have as yet -reversed the downtrend that has been in effect for the past year, but there is a distinct probability that the shorter-term index will reverse the February-May downtrend in the very near future. This could be followed by a reversal in the longer-term downtrend on the breadth indices. Until the breadth indices reverse the downtrend, we would confine our buying to periods of weakness within the 650-605 range rather than following strength A rather lengthy period of backing and filling will probably be needed to fulfill the technical requirements of building up a new base pattern. ' the advance is resumed, the leadership will be quite different than that of the 1960-1961 period. During that phase, the leadership was mainly centered in either glamo issues or defensive groups like the foods, tobaccos and ut' more cyclical grou s that reached their highs during the 1956-1957 period did i tle e'tWise during 1960- 1961. They will probably be the leaders of the ! gP s The glamour issues of second and third t ose to ridiculously high – -price s are–fa-c ed;–in' our-opinion,– with- a' er- the-oone-x-t—-seve-ra-i-yeaI'-s. Despite the fact that some have 1 they are still selling at extre el 'RfjJ'. of 0 to 75, considering their quality These issues will find it difficult to have more than sporadic tec 'c a disillusioned holders selling on any sign s of strength and b .i b rs. There will be exceptions, of course, but this type of issu i r a n several years of frustrating swings back and forth in a narrow tradin r B f e highs of 1961 are even approached. This mass hyste' nd over-speculation in certain classes of issues has occurred many times in the It happened on a smaller scale in the uranium issues and the Canadian oil and natural gas issues in the middle 1950s. The aftermath of such specu- lative booms is shown in the price action of the Canadian oils over the past five years. Take .acific .etroleum (13) as an example. Due largely to the long-term dynamic growth possibilities in Canadian oil and gas, and helped by the Suez crisis, 'acific etroleum rose to a high of 39 in mid-1957. At that time, this price was totally un- warranted. By the beginning of 1958, it had declined to 17. The strong 1958 general market advance carried it back to 22, but a slow but steady downdrift to a low of 8 in 1960 followed. During this period, however, oacific 'etroleum built up a fairly sub- stantial base in the 8-15 range. l'Tow, both the fundamentals and the technical pattern suggest opportunities for capital appreciation in 'acific Petroleum and other Canadian oil and natural gas issues. Like the faded lower-grade glamour issues of today, these stocks suffered a drastic price decline. The great difference, however, is in the fact that the Canadian oils have gone through a lengthy period of consolidation and have, from a technical viewpoint, formed sufficient bases to indicate a worthwhile upward move when the general advance resumes. The glamour issues will require a lengthy period before this is accomplished. In speculative accounts, it is suggested that tax losses be taken in the lower-grade glamour issues and the proceeds be switched into anadian oil and natural gas issues. Dow-Jones Ind. 650.70 Dow-Jones Rails 136.32 .2;DMUND W. TAB ELL ;TjALSTCN & CC. INC. – — ThiFl market letter is not. and under no Circumstances IS to be construed as, an offer to 'lell or a soliCitation to bu) any securities referred to herein The mformatIon contninro herem IS not guaranteed as to accuracy or completencss and the furnlshmg thereof 15 not, and under no cIrcumstances IS to be construed as, n representa- tum by Walston & Co, Inc All expressions of OPlDlOn are subJect to chnnge Without nobce Walston & Co, Inc., and Officers, DIrectors, Stockholders and F.mplo)o'cc'l thereof, purchase, sell and tRay ho.'l.e an Interest m the securities mentloned herem. ThiS market letter IS mtended and presented merely as II general, inrormal commentary on day to day market news and not as a complete analySIS AddItional mformatIon With respect to any SecUrltlCS lCerrcd to herein Will be furnished upon r e q u e s t . ' , – \\;.1 301

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