Tabell’s Market Letter – April 26, 1963

Walston &- Co. Inc MellIhel . XCII' Ymk Sinck E'challge NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA OFFICES COAST TO COAST AND OVERSEAS CHICAGO TABELL'S MARKET LETTER April 26, 1963 The art of technical analysis consists of using the past history of the stock market in order to draw conclusions as to pr9bable future action. It goes without saying, therefore, that in order to form a meaningful idea of future probabilities we need to have a fairly accurate idea of past history. Normally, we try to picture previous action of the market as a whole by using various averages. At the moment, the picture painted by these average is, to say the least, somewhat misleading. The recent history of the Dow-Jones Industrials, for example, is well known to most investors The Dow reached a high around 740 in November of 1961, drifted downward through March 1962 and then slid off precipitously to a low of 525 in June, 1962. Then, after fluctuating between June and 0 ctober, it immediately commenced a sharp rise which has brought it today to 718 or back, almost, to the 1961 high. For the analyst who takes the trouble to study the technical patterns of all 1, 800 issues listed on the New York and Arne rican StJck Exchanges, such a picture is hardly descriptive of what most stocks have been dOing. To begin with, the percentage decline on the Dow-Jones Industrials from high to low was 290/0. The great majority of issues suffered much sharper reverses than this. Those who follow the averages would have us believe that the market is now within an ace of equaling its all-time high. The number of stocks that, at current levels, are anywhere near their all-time highs or, indeed, any- where near their 1961- 62 highs, constitutes an listed issues. Although this fact should be quite clear with a few statistics. The Standard & Poor's 500high last April 17th of 68.92, within 5 of 1 61 11 even further to a level above 70. The 500- c . dex Wse, rth supporting nd ., example, reached a f 7 21. It has since advanced e broken down into a number of industry indices, and One all-time high, a substantial is hardly the case. As a mat in the 500-Stock grou total of fifty-six h 0 as Motion Pictures, e Tires and Rubber an e et with the overall index close to its ireeswouldbeinnewhighterritory.Such 17th, only eight of fifty-nine indices e e 'gh territory and these indices represented a s . e group. Meanwhile, within the average, such indices . ent, Radio-TV Manufacturers, Steels, Tobaccos, were, as of last week, anywhere from 25 to 50 below their 1961 In other words, in looking at the whole market rather than the popular averages, we get the picture not of a sharp upswing from the October lows, but rather of a mild recovery in which action has been viciously selective. This picture, moreover, is central to any analysis of the present stock market because it is exactly what one would expect after a of the magnitude that took place in the first six months of 1962. A broad consolidation phase is, as this letter has repeatedly stressed, necessary in order to build a base for the market eventually to mOve On to new high territory. Such a consolidation phase is exactly what has been taking place since last June and, moreover, if history is any guide, it may continue for some time. The rally from the October lows is a normal part of this pattern and has been, indeed, profitable to a number of investors who owned the right stocks, although it has hardly enriched an equally large number who have stubbornly retained the speculative favorites of 1961. It is well to realize, however, that its magnitude has been distorted by the averages and that it is highly improbable that the strength which began in October of last year constitutes the initial phase of a new bull market. Dow-Jones Ind. 716. 16 Dow-Jones Rails 163.24 ANTHONY W. TABELL WALSTON & CO. INC. Thl'i m,lrl., …l lettel ,… not, ,llll lim1cl no CII … I … 10 be cnn … tI lied .1 …. lin niTI'I I ,,('JI I 11 ,,,,hl'ltnl IIIn t IIII ,In … I ('rCI! cd tu hel ('Ill The Illf,., Ill.llmn ( nlUI n ('.1 here1 n I' nut I-fll.n H 11 I( ('.1 1' to .1('1 tlllllY ,, ,,,l1ll'iet('nc…… 11111 the fill n htll Ill! \ IWI cr I !lui. ,I nd UU,j('1 11 ,'II 01111,1.111, IY I' t hc ,,,lhIlIlCtI a,. n I elll C'-enta- lIn h,. \'alon &. Co 1m All C'll'rC'-,wn, of IHIllUIl ale 'Ilhjcc\ tu \\I\hl1t 11\UC' \',I\,\n !.. Cn, 1m IIUti OffllI', nI1CllUI' Slulhhul,ler.. an'\ JJJ1J,WI't'''' tnC'r(',f. .mll m,IY h,J\c lin In\C'Jl'''t JI) the ..,e.\J)ltl …. mcnll',l\ed hel!'!)1 fhl' mlllhl'1 lell!,1 ,., mtt'mlcd 111111 1I(.oollt',j mCIl')Y ,I' I! !cne,) 111(,,) m,,1 t mmentlll y un d,),. to ,1.1)' !l\,lrhf'1 Ilew' ,Iud nut ,I' It UHll)tlctc ,\,I,III,,,n,l\ 111(' 111,111U1I \\llh It'''',,!' t I ,Ill) III JilL I cfrlC,\ It I hC1CI1I will uIIlI,hcu uJ,,,n \\' lUI