Tabell’s Market Letter – February 14, 1964

Tabell’s Market Letter – February 14, 1964

Tabell's Market Letter - February 14, 1964
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Walston &- Co. —–Inc —– Xr/' Ynrk Sinck Echm'(Jl' NEW YORK SAN FRANCISCO LOS ANGElES PHILADElPHIA CHICAGO OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER San Francisco, California February 14,1964 The following is a summary of a talk to the Security Analysts of San Francisco at their Thirty-Fifth Anniversary Program at the Mark Hopkins Hotel on Thursday, February 13th It has been our contentlOn for some time that the stock market reached a major top in the period between 1957 and 1961 and a major bottom between 1960 and 1962 and is now in a major reaccumulation area that will result in a much higher price level over the next several years. While individual issues may work somewhat above present levels in the near future, we do not believe that the present advance is the start of this major upward movement. Probably more time is needed to broaden the reaccumulation pattern in a great many stocks. The present advance from 1962 lows is now twenty'matims 010 ana probaElY1nneed of a corrective phase in the not too far distant future. It is difficult to reconcile the thesis of a reaccumulation phase with the action of the averages. Both the Dow-Jones and Standard & Poor's Industrial averages have reached new high territory above the 1961 highs. It must be remembered, however, that both these aver- ages are dependent on the price action of blue chip investment issues. The Dow-Jones aver- age is composed of thirty of the largest companies and the Standard & Poor's index of 425 stocks is a weighted index in which the thirty or forty largest companies play by far the pre- dominant role The blue chip investment issues have been bought by large institutional buy- ers and have been the strongest segment of the market with the exception of a handful of issues that have caught the speculative fancy. Most stocks have done little marketwise since they reached their highs in the period between 1957 and 1961. For example, The Value Line Investment Survey has an average of 1,100 stocks which CUlly New York Stock Exchange but also American Stock Exchange and ise . g banks and insur- ance companies. This average is not weighted,but in of the percentage rise and fall of each of 1, 100 stocks of representative coq\p!l;1ies. . s index has failed to pene- trate its 1961 high, and only about 30 of steek ve moved above their respec- tive highs reached in the.pe!,.iod To fully understand the price a t'o 6 . . h p;)g. et sinc'e 1957, the action of individual stocks must be studied reached a high in November- December, 1961, this is t tr e a stocks and groups. Airline.s, Aluminums, Coppers, Lead and i . 'I'o ,Metal Fabricating, Oils, Papers, Railroads and Textiles reached t h 61, but in 1956 and 1957. Autos, Broadcasters, Build- in r ectrical Equipments, Farm Equipments, Natural Gas,Steel Sugars and Tires reache eir highs in 1959 while Banks, Drugs, Electronics, Finance Companies, Foods, lOn Pictures, Office Equipments, Publishing, Radio and TV, Retail Stores, Soaps, Tobaccos, Utilities and Vending Machine companies made their highs with the averages in 1961. It is interesting to note that many of the groups that have been the leaders since 1962, such as Airlines, Autos, Broadcasters, Farm Equipments, Metal Fa- bricating, Oils, Railroads and Textiles, are the stocks that reached their highs in the 1957- 1959 period, and reached their lows not in 1962 but in 1960. Thus, they were in broad re- accumulation periods from at least 1960 to 1962. They reached their lows in 1960 before many stocks reached their highs Many of the groups that reached their highs with the mar- ket in 1961 probably need a longer reaccumulation period. Present technical action indicates that the market is losing upside momentum. This is reflected in the various breadth indices. While the averages have been reaching new high territory, the breadth indices reached their highs in September and have failed to confirm the new highs in the averages. A major divergence occurred in late October. Contrary to general opinion, poor breadth action does not indicate an immediate decline. In 1961, a majo divergence occurred in August, but it was eight months before the market declined. It is sim ply a signal to lighten accounts on strength. Before the major advance occurs we believe the market must undergo a corrective phase. Just how far such a correction would carry is problematical at the moment. Major tops have not yet been formed. As a rough yardstick, we would expect a third to a half correction of the advance from the 1962 lows. Such a correction would be the last opportunity to buy good stocks prior to an advance to much higher levels in' the late 1960's. DOW-Jones Ind. 794.56 Dow-Jones Rails 183.75 EDMUND W. TABELL WALSTON & CO. INC. 1'hl market letter not, lind under no IS 10 he con'ltrued (IS, 1I.n offel to UJ' II SOlil'llllh..n to lnl)' nn)' 1erell c.1 to hClcm The mfrmll.tinn 'untnmed herem IS not l!lmrnnt('ed 11.'1 to nccnrnc) 01' coml'ictene5 flnd the fl1l nlhlllJ! thelcuf I not, anq lITHlCI no CHCum!!tUTH'1!'!I IS to be UB, U rell! e,entn- tum h) V.'olston & Co, Inc All ell.pre;SlOns uf opmlon nrc sullJed to chl,n),(e \\lth(1ut nuliC'e Wnlbton & C, Ine, UTHI Offleel'li, Dllectnl'l, S(ockhlder.. Ollr! therCQf, plllchase, sell and may flilve nn Intcre'lt In the 'leCurl(lC'\ men(Iltelr heleln. 'fhl'! mnr(.,et fcllci \'1 Intenlie,lllnd prc.,cnt('(r merely n ).lenetnl, Infurmal commentury on tillY to da) mnrket news nlld not 0' a completc unah'tll AdditIOnal IIlfUl mutwn …. Jth le,pe('t tu nny l!eCllIltles Idellet! to helelll …. iII he furnll!hed u,pon request \\.. 01

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