Tabell’s Market Letter – July 26, 1965

lABELL'S MARKET Walston &Co. —–Inc – – – INVESTMENT BANKERS MUTUAL FUNDS MUNICIPAL BONDS Members New York Stock Exchange and Other Principal Stock and Commodity Exchanges OFFICES COAST TO COAST AND OVERSEAS LETTER July.26, 1965 The market has shown normal technical action since the Dow-Jones Industrial Aver- age reached an intra-day low of 832.74 on June 29th. The rally to the July 15th high of 889.98 was a one-half retracement of the 112-point decline from the May 14th high of 944.82. The decline from the July 15th high to last week's low of 857.71 was a retracement of a little over half of the rally from the June low. Thus it would seem that the market is again in tech nical balance after the wide price swings since mid-May. Total volume of trading on the New York Stock Exchange on a ten-day moving average is now at the lowest point of the year. The emotional extremes that brought about the wide price moves seem to have disappeared at least for the moment. Selling volume, which had been moving.sharply higher sillce .tWril,. nasalsodeclihedsince the June there'has Deer. no great increase in buying – ..- volume. Last week's decline was brought about by a mild increase in selling volume and a sharp decline in buying volume. There is considerable bearishness in the market place – as witness the large increase in the short sales as reported last week. In June, this bearishnese was actively translated into actual sales. Since the June low, the attitude has changed to one of wait-and-see rather than active pessimism. The short term pattern of the market is interesting. With both the 112-point decline and 57 -point advance corrected, the market may be forming, in technical parlance, a head and shoulders bottom. On its first decline from the 944.82 high of May 14th, the Industrial Average dropped to 859. 13 on June 15th. This was followed by a quick recovery to 888.44. This high was followed by a decline to the June 29th low of 832.74. Since that time the mar- ket, at the July high of 889.98, has recovered back to the of 888. 44 and back to the June 15th low of 859. 13. In effect, this gives a patte of range between, .roughly, 890 and 860, with a head, or stick, on the his ing area has a dura- tion of thirty-one trading days with only three days tota w the 890-860 trading range. If this range holds, it would indicate t – selling wave was emotional in nature rather than caused by actual develop e . A' Y to move above the July 15th higt –would-indicate could, of course, easily be event, a testing of the June low fr -lows-This-potential-pattern ' below last week's low. In that There is no change in the downside po- I i I tential. The cated. cy i e have suggested since early June, is still indi- In last week' t we ntioned that, at the June 29th low of 184.63, the Rail Aver- age had reached a majo s rt level. The Average has since recovered back to 204.33. This is a recovery fro e June low of almost 110/0, as compared to 70/0 in the Industrial Average. The Dow-Jones Rail Average closed at 197.12 on Friday. From a technical view- pOint, the downside potential is 185-180. We believe this group has a very promising long term potential with below-average risk and should be bought on minor price weakness. We have included six rails in our recommended list mainly because of the yield factor. These are marked with an asterisk in the list below which includes a number of yield rails. We believe there is now an indication of higher price levels along with substantial yields. Atchison Chesa. & Ohio Denver, Rio G Great Northern Illinois Central Louis. & Nash. Price Yield PiE Ratio 32 5.0/0 11 Norfolk & West. 67 1/4 5.9/0 14 Northern Pacific 191/2 5.00/0 533/4 5. 60/0 12 14 Southern Pacific Southern Rwy. 471/4 4.20/0 12 Union Pacific 71 5. 60/0 8 Price Yield PiE Ratio 1263/4 5. 60/0 14 467/8 5.60/0 357/8 3.80/0 13 11 52 1/2 5. 30/0 38 4.80/0 11 10 In a somewhat different category are the merger rails like Atlantic Coast line, Seaboard Airline, Chicago Northwestern, Chicago Milwaukee St. Paul, New York Central and Pennsylvania. We believe there is a substantial long term potential in these issues also. Dow-Jones Ind. 863. 97 Dow-Jones Rails 197.12 EDMUND W. TABELL WALSTON & CO. INC. ThiS market letter is published for your Cf'nvemence pnd infOrmatIOn a.nd 18 not fl.n offer to sell or II. soIlflu..t,on to buy ftny dlscuued. The tn- formntlOn was obtaIned from sourC'('; we hdu'vl.' to 11.' rl'hable. but we do not KUarRntee Its RC'curncy \\ Alston &. Co. InC'. I\nd lis officels. dlre.'t.ors or (!JI'lpJoyees may hn.ve an mterest m or purchase And sell the referred to hert'ln WN.301