Tabell’s Market Letter – January 03, 1964

Walston &- Co. – Inc – – – – – JIl'mh('J'..; .\'('11' rod) Stork E.l'riW'IlPl' NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CHICAGO OFFICES COAST TO CO'ST AND QV!;RSEAS TABELL'S MARKET LETTER January 3, 1964 .. Relieffromtl1e-pressure!of tax-loss selling in depressed issues and the failure of the anticipated 1964 profit-taking to appear, resulted in a sharply higher market during the past week. Friday's intra-day high on the Dow-Jones Industrials was 771. 73 as compared to the mid-December high of 773.07. As we noted in our letter of December 13th, the wide fluctuations in November built up a new technical pattern that enlarged both the potential up- side and downside obJectives. The upside potential, from a technical viewpoint, is indicated as'a possible 775-795 on the Industrials, and 185-190 on the Rail average Both of these potentials are not much above present levels . . .on poi,nt to wa tch is the .Dec.ember low. The actual low was 746.-78 made On the first day of the month. As noted in our December 20th letter, the stock market in every year since 1897 has had some sort of a year -end rally. In some cases the rise has been substantial and has lasted for as long as six months. On other occasions, the year-end rally has been of only a few day's duration. The clue has, in the past, been the ability of the market to hold above the December low for the first three months of the new year. If the December low holds for the flrst 2 1/2 months of the year, the trend has, in the majority of cases, been upward for the rest of the year. If the December low is broken early in the year, the trend has usually been downward for the rest of the year. The reasoning be- hind this theory is that the market is subject to maximum downside pressure at the peak of tax-loss selling. If the pressure becomes greater after tax-loss selling has ended,new down ward tendencies are in force and the December low will be broken. Due to the unfortunate happenings of November, it is possible that some has occurred. It is problematical whether the actual low of 746.78 reached 0 t Y of December is the point to watch. The peak of tax-loss selling was ch n December 23rd when the Industrials reached a low of 752.82. Actua is is ably not important. If the December 23rd low is broken, the e g of the 746.78 low also. The case be 720 . possible decline to !he .695 -685 The breadth index over the past week,but it is still quite a distance below the u highs as contrasted to new highs in the In- dustrial average. Thu t ve nce in effect since late October still persists. Con trary to general 0 le breadth signal does not indicate an immediate de- cline in the market. s nal oss of momentum ,but the averages can continue higher for quite some time as the 1961. It suggests,however, that holdings should be lightened on strength. While breadth action continues unfavorable, there is no indication of a major decline like 1962. The background conditions are q.ite different. We have continually stressed the point that the market, in our opinion, is in a major reaccumulation period that probably need more time to complete. From a technical viewpoint, the most constructive action at this point would be a decline that would enlarge the potential base patterns already formed. Breadth action turned unfavorable in both 1959 and 1961 and indicated the 1960 and 1962 declines. The present pattern is much more similar to 1959 than 1961. If you recall the 1960 market,you will remember it was a two-way market. The Industrial average declined from an early high of 688 to an October low of 565. By the end of the year, the market was again moving sharply higher and closed around the 615 level. Many stocks declined during the year, but many bucked the trend and moved higher. Beckman, Brunswick, International Business Machines,Litton and Texas Instruments,and a sizable number of additional issues moved against the trend. Leadership would, of course, be quite different in 1964, but similar price action could occur in individual issues. A new edition of our recommended list has been published and is now in the hands of your Account Executive.All of the issues mentioned have been recommended in the past and continued holding is advised. Buying levels,which are mostly below the present market, are noted. These are not trading recommendations, but are suggested for holding over the next six months or longer for si2able percentage appreciation. It is our thought that accounts con- cerned.mainly with. capital appreciation over the longer term should be 25 liq.id at the mo- ment in order'to-await-buying opportunities. D -J BIniis7 67 d 68 B B1 EDMUND W. TABELL WALSTON & C.o.INC. 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