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– \ — 'I Walston &- Co. Jnc FILE COpy l1om/,,''' Yod,. SII)('I; E.rrilO1lfl' NEW YORK SAN FRANCISCO LOS ANGElES PHILADELPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABEll'S MARKET lETTER February 15, 1963 Again last week the great majority of stock market indices moved into new high territory. The Dow-Jones Industrials reached a high of 689. 67,on Friday, and the Rails and Utilities also achieved new peaks The Rail action was particularly impressive as the carriers bettered their 1961 high, and, at the week's hlgh of 155. B5, the Dow-Jones Rails were at a level not matched since the early part of 1960. Although the rise since the October lows has been persistent, its recent momen- tum has slacked somewhat. As an example, by the end of November, the Industrial average had advanced 106 points or almost 20 in the short period of 25 trading days. The high reach ed at the end of November was 655.95. Since that time the average has oeen able to advance – . only5li14inraaing days. Pi substanTfaf minority ofSfCiCks, moreO'Ver, have not, so -far thlS year, moved ahead of thelr November-December peaks. This sort of action is hardly unexpected. As the market strength goes on, individua issues continue to reach the objectives outlined by the bases formed in 1962. As more and more of these objectives continue to be reached, it is logical to expect the averages, even while making new highs, to lose momentum. This is a process which can continue for some time and, indeed, there wlll not be too much reason to worry seriously about the level of the market until such time as the strength in the averages falls to be confirmed by breadth, volume and other indlCes. This failure has not yet occurred. Yet, this letter has repeatedly stated that we expect 1963 to be an inside year in the market – – that is, a year 10 which the averages will make neither a new high nor a new low. With the Dow-Jones Industrials now at 686, viously does not leave a great deal of room on the upside. of room between present levels and the old low or, rwn-e J prices, and the major support area in the 600-570 zchle'v Before becoming alarmed about the its proper perspective Common stock price 0r .s ic high of 740, this obt; there is a good deal etween current , it is necessary to put it in e one almost universal attribute After sharplY,–..Rrice1L-do . .rn.QYesideways for – a period of time in a distributive s 'Wr downward. Conversely, prices sel dom move straight up agaln but, rather, spend a period of hme in a so- called base area before lOt r major advance. Indeed, the very reason we feel that the market will 0 i on this move is the fact tha t it has not yet formed a sufficient long-term 0 . til such highs. In order to do this, it would, on a long-ter basis, have to continu 0 some time back and forth within the confines of the broad 525-700 area, with the p bility that a great majority of the subsequent work will be done in the upper part of thi range. Parallel action can be found in the 1946-1949 period. After the sharp decline 10 the Fall of 1946, it will be recalled, the averages moved up sharply into the Spring of 1947 in a move quite similar to the present one – although not quite as great in erms of length or percentage advance. The following two years saw the market trade back and forth in a relatively narrow range, laYlOg the base for the terrific advance that commen- ced in 1949. Although lt will probably not need two more years to enlarge the present base, it will certainly take a goodly period of time. And yet, during thiS basing-out period, the action of individual stocks will undoubt- edly be quite diverse. Here, in fact, is the probable key to stock market success over the next year. For a great many stocks, which made their highs as long ago as 1956, have alreaqyormed bases which indicate important new highs. To takea well kno,,,n-example, Standard Oil of New Jersey reached a high of 68 in 1957. Its low of 38 in 1960 was not even approached in the 1962 break. Viewed on a chart, the action of Standard of Jersey since late 1958, appears to be a long v-shaped base p&ttern — a pattern already sufficient to indicate considerably higher levels. A great many other stocks, by contrast, made their highs in 1959 or 1961 and have undergone practically no consolidation since reaching lows in mld-1962. It is quite evident tha t stocks of this type, and they are still in the majority, will have to do a great deal more work before long-term upside moves are indicated. Any decline that might take place from present levels would have a different meaning in different securities. For some stocks it would be a temporary drop, providing a buying opportunity just prior to a ma- jor upside move. In others, it would simply mean a return to, or through, the old lows as part of the process of forming a long-term base. Dow-Jones Ind. 686.07 Dow-Jones Rails 154. 96 ANTHONY W. TABELL WALSTON & CO. INC. Imll h('\ Jcttel Ilot lind Un/lei n I'll b tn he ,Ollh lied n .. nu I!'(I jn ..('11 ' II IU'lt IIIn t ITI (,l'llIltle.. I t'('1 t cll 1 hel ('til The mrOl m.rtll1 nUt1tl(',1 h .. reln I not I!II111ulI\('(I1 n .. tn U(rll!Ul) III tunlpif'i('IH. .. Ulltl the th,'r'r ,… nt '11101 undl'l no I'll I um .. t,lIlt… h I he ,11 ..1111,.1 U.. ,.1 11'1'1('''''111 \- hy \\nl ..ton &. Cn, IIH' All l'.prl'…. wn…. f 1!l1I101I .111' .. ul(,,\ tll ,hlllg'I' \\llhlIl 1Illc, \\'.,1,\,,11 t C lilt ,1I1110tTI1''I…. 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