Tabell’s Market Letter – November 07, 1969

, Walston &- Co. —–Inc —– Members New York Stock Exchange and Other Principal Stock and Commodity Exchange. OVER 100 OFFICES COAST TO COAST AND OVERSEAS IL E TABEll'S MARKET lETTER November 7, 1969 The passage of hme and the progression of market cycles continually bring new sets of problems which are posed to the market technician. Until just recently, the major prob- lem was to determine whether July 29, 1969 constituted a market bottom, or merely an in- terruption of an ongoing decline, The evidence inclined us fairly firmly toward the former view all along, and it has continued with each week to be more conclusive. The market strength of the latter part of last week when the Dow again approached its October 24th high added further evidence. It was accompanied by positive readings in a number of lagging indicators — indicators designed to signal uptrends not close to bottoms, but after a revers has been well confirmedAt.the present time, most such devices are in positive territory –and the premise-of a new seemsto- furtherevi -, . dence contradicts it. This being the case, a- new set of problems is then posed, centering around the ques tions of how far can the advance carry and how long can it be expected to remain in effect. There is, f!ir a number of reasons, no easy answer to these questions at the moment. One reason is that all of the popular stock market indexes, along with a substantial number of individual stocks, are in what are known in technical parlance as broadening base patterns. A broadening base occurs when a decline takes place with a number of significant pauses on the way down. When the market finally bottoms and a recovery sets in, very often pauses will take place at approximately the same levels on the upside followed by a resumption of th uptrend. This produces the familiar head and shoulders type of base formation which, when it is complete, allows for a much broader the case. Let us take as an example the current chart 9f&tur h\'iiow- nes Industrial Average. Between May and July of this year, the fr ust under 970 to its low of under 800. There were, however, a couple of f\tlj.y si cant pauses on the way down, one in early July in the 868-888 area, remember, once having touched its w – – -\ 'd id-July at 840-856. As we all he subsequently remained in a -at-the-t-ime; -the upside'potenti-als -of-this base centered around the penetrated on the upside in October, however, a trading rang is willing to accept h t i an 81n characterized the market ever since. If one he' e late July pause in the downswing, a broadened upside projection 0 – 5 c s possible. The pattern could broaden still further with additional work in th 8 ar A similar possib' for broademng exists in the Standard & Poor's 500. A conser vat i v e projection on e upside is 103 versus a present level of 98. This would be below both the May high of 106.74 and the 1968 all-time high of 108.37. It is, however, not at all a stretch of the imagination to conceive that the pattern could broaden so as to indicate an objective in the 110-115 range or a newall-time high for the Index. The problem of projecting an upside target is further compounded by the fact that, since the middle 1960' s, bull markets, in the averages at least, have been considerably less dynamic. The Dow advanced better than 700/0 between 1958 and 1961, and better than 850/0 between 1962 and 1966. The subsequent advance to December 1968, however, was only 320/0. The familiar argument tht the Dow was not representative of the market during the peri od is, at best, only partiril1y true, since the broader-based incJices also chalked up historically small adva.nces in 19613-(;8. One that seems to be ;hanging, however, is the length of time which an advancing phase occupies, On this basis, it would be normal to suggest that the coming upswing will last somewhere between a year and two years, pretty much the standard for the post-war period.- – ..'1 In summary, then; -there–are- some real difficulties involved in forecasting just how far the market rise may carry,and we would not expect these difficulties to be resolved for some time. It is not necessary, however, to be able to see the end of the road at the begin- ning of the journey. The odds now favor a fully invested position until such time as market evidence persuades us otherwise. Dow-Jones Ind. 860,48 Dow-Jones Rails 199.16 ANTHONY W. TABELL WALSTON & CO. INC. AWT'amb This mRrl.ct kttl1 IS pul,ilshed for YOUJ con'cnlcnee It,d 1nfOlmRtmn nnd 1, nut In O.fI'CI to 01 H formntJon \\,IUI obtRlllooJrom wurce. we bellevl' to be rehal,lc. hut do not gunr,\l\tc(' Its lICCUH1C\ employees rna) have an mterellt In or pUTrhase an'\ sell the S('CUlltW' referred to hetelll — lu ,U) ;,eCUllth!!\ d,,,tus,,ed The 1fiv \V,llslon &. Co. Inc ,tnd officers, Ullcctors or