Tabell’s Market Letter – January 22, 1965

Tabell’s Market Letter – January 22, 1965

Tabell's Market Letter - January 22, 1965
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Walston &- Co. INVESTMENT BA-NK-ER-S — MIUnTUAcL FU-ND-S – -MU-NICIPAL BONDS Members New York Stock Exchange, Chicago Board of Trade and Other Principal Stock and Commodity Exchanges OfFICES COAST TO COAST AND OVERSEAS lABEll'S MARKET lETTER January 22, 1965 The year-end rally which had moved the Dow-Jones Industrials ahead from their December 15th low of 850. 19,- came-to -at least a temporary halt on Tuesday as the index reach ed an all-time intra-day peak of 902.10. Over a week ago a number of our short term indicators had become overbought, and some of the less sensitive of these indicators also moved into overbought territory early this week. Since the prior base pattern had suggested an upside potential in the 884-910 area, the loss of momentum in the latter part of last week was less than surprising. It is, of course, possible that another attempt may be made to move deeper into the area mentioned above. The subsequmt forma tion of a new pattern will afford a clue as to the course of the marketJrom.this pOint., , It is, in our belief, generally unwise for the average investor to attempt to interpret for himself technical indicators. Technical analysis is a complex and demanding art and is best left to the professional. On the other hand, there is no reason why the individual in- vestor should not be able to formulate for himself some approximation of the technical be- havior of the stocks he owns and in which he is interested. The investor is, in most cases, constantly following the price behavior of the stocks in his portfolio. It is not too difficult a task for him also to watch the behavior of these stocks relative to the general market. This is the concept of rela tive strength and, as used by this department, involves detailed com- puter analysis of the mathematical behavior of stock prices. The same principle, however, applies to the determination of approximate relative strength by simple observation. For example, the Dow-Jones Industrial Average reached a high of 897.00 on Novembe 18, 1964 and exceeded this high by a moderate amount on this week. Yet, as could be expected, the behavior of Individual stocks in the r ite different, some being higher in November, some in January. I, for pIe, sold at 97 1/2. on the day the average made its January high vs. 89 nt e of the November high. By contrast, International Harvester, which at /4 ovember 18th, closed at 807/8 on January 19th. Since the averages e pro' tely the same on the two days, it follows that General-Electric was Harvester considerably a etter than-the average and Internatio 'a.1Jtu dt1fcult for the individual investor to take tw time periods such as October- v when the average sold at the same approximate c r' of his holdings on the two dates. Such a compar- ison might give ho r a,ll,t 'stocks, for example, some pause. General Motors, Chrysler and Ford s a'r- 02, 67 and 62, respectively, in the October- November period, and the best th y h een able to do in recent markets is 98 1/2, 62 and 55, res- pectively. Similar acti as been shown by most rail stocks. Atchison, Topeka & Santa Fe, for example, was 37 in November and 34 1/2 recently and Southern Pacific was at 44 vs. 41 and Union Pacific at ,47 vs. 44, Sometimes there will be variations within industry groups. Standard Oil of California has sold above its November high, Standard of New Jersey has not By the same method, it is possible to pinpoint stocks that are acting better than the market. One indication of the excellent technical action of the airlines is the fact that East- ern recently sold at 48 vs. a November high of 41, and National at 70 vs. a November high of 60. Drugs and electronic stocks have recently given favorable indications by exceeding, on the recent rally, their November highs. Of course, a comparison of this nature should only be a first step, not a rigid method of making investment decisions. 'For ex-mple, mentioned above, both automobiles ald rail stocks have failed to exceed fheir November-highs. In reality, the technical patterns of the two groups are quite dissimilar. Automobiles are showing declining relative strength at a time when all upside objectives have be,en reached. ,ails, on the other hand, although act- ing poorly on a short term basis, have declined back to strong support levels and have up- side obJectives, for the most part, considerably above their present prices. This makes many stocks in the group attractive candidates for purchase on weakness. Provided their importance is not over-exaggerated, it is probably worth the investor's while periodically to make relative strength comparisons such as these. They can then be used as warning signals to check further into the technical and fundamental progress of the stocks in his portfolio. Dow-Jones Ind. 893.59 Dow-Jones Rails 212.09 ANTHONY W. TABELL WALSTON & CO. INC. 'ThiS market i('tter IS not. and under no Clfcumstll.nces IS to be construed us an oITer to sell 01 a sohCltatlOn to huy UIIY secuntles referred to herem The information contamed hereil'lls not as to accuracy or coml)letenec;s lind the fUfmshm),( thereor not. and under no Circumstances IS to be construed as, a l'cpre;cnta t b W lston & Co Inc All expreSSions of OPllllon arc sublctt to chan),(' wlthollt notice. Walston & Co, Inc, and Officers, Directors, Stockho'lders and athereO! sell and may have un wterest m the secuntle. mentuHled herem 'fhl!. market letter IS Illtended and presented merely as a general, on dn; to mdrket neWS and not as a complete naIY!!I! Acllhtlonni Information wlth lesllecl to an) secuntles referrei to herem furnlshed upon request —.—-

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