Tabell’s Market Letter – January 23, 1970

Walston &Co. Inc –….;,– Members New York Stock Exchange and Other Principal Stock and Commodity Exchange. OVER 100 OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER January 23, 1970 About the best that can be said of last week's stock market is that, for a while at least, it stopped going down. With the Dow-Jones Industrials reaching a low of 770.72 on Tuesday — a level a shade above the lows of last December — a modest advance on unim- pressive breadth and light volume occurred on the middle three days of the week. On Friday however, prices dropped lower again, reaching an intra-day bottom of 774. 35. By the early part of the week, as had been previously forecast in this space, most of our short-term indicators had reached oversold territory, and with the market testing the December lows, the logical point for a rally had obviously occurred. However, a trend re- versaLconsists .OLtw9 things. anj second, some worthwhile momentum on the upside begins to tie -demonstrated. -ThfS-latter – factor was noticeable by its absence in last week's trading. Thus, on a short-term basis, at least, there are few signs of encouragement, and those few tend to be somewhat tentative. The December lows in the popular indices have so far held by a hair' s breadth. A number of issues have penetrated downtrend lines — not so much by any dramatic reversal but by lateral movements which violated the trends. The number of stocks making new lows has remained at a relatively low figure considering the level of the market, indicating continued downside exhaustion. All of these factors, of course, could change at a moment's notice. Paradoxically, all this weak short-term action is taking place at a time when the longer-term cyclical picture is slowly clarifying, and clarifying in a way which should pro- vide fuel for investor optimism. It is now almost 14 ullmarkethighsof 1968, a time during which most post-war bear ha u rse. It is, more- over, becoming extremely clear that the changes ginning to present themselves. f\ v A st market turn are be- Economic data being released daily is c my .of a business slowdown. In- dustrial production has been , uto es continue to drop, and Real Gross 0 quart. appaI'ent- that at least a slowdown, and has begun. Contrary ,thi i ion's illlish for stock prices. Let us remember that the onset of a recessi . ed immediately but generally some six months or so after the fact. e enough data at the moment to say with certainty that we are now in a rece '0, b en the data becomes available — and we think it will — it will probably indicate the recession began some time around October, 1969. This being the case, the ti for an important stock market bottom should be at hand. Let us document this by citing past experience. In the 1948-49 recession, the stock market reached its bottom seven months after the peak of economic expansion, and moved above its high for the peak month two months later. In the 1953-54 economic decline, the stock market low was reached two months after the business cycle peak and new highs were achieved two months after that. In the 1957-58 recession, the lead was three months, al- though it took a year to reach new highs. In the 1960-61 decline, the lows were reached five months after the business cycle peak, and new highs were being posted four months later. Now, if the recession began in October, we have already gone three months past the peak of economic activity, and it would be logical to expect a bottom in stock prices now or at any time within the next two to three months. It would be logical also to expect a move well above the 800 level on the Dow by mid-Summer, and also, in the light of previous ex- perience, a continued upswing after that. The fact that most stocks have been in long-term base building processes since last July, confirms the economic timing. In summary then, while the short-term outlook for the market remains negative and confused, the longer-term picture becomes increaSingly strong. The obvious corollary is that any immediate decline in the stock market which might take place would constitute an opportunity to add to long pull holdings. Dow-Jones Ind. 775.61 Dow-Jones Trans. 170.24 ANTHONY W. TABELL WALSTON & CO. INC. AW.Tamb This mArket let\;('r IS publl'lhl.od for )OIJr COnVenl('nCe nnd InfOlm'ltinn and IS not Itn offer to s1\ or It soht'ltatlOn to bu) an) discussed Thl;! In- formallon Wit nhtamed from we Il('h(v(! to he rehab!.. but …. e ilo not guarantee Its accun\cy & Co Inc ROil lls officers. ihrl'Cwrs or employees may have an Interest In or l1urch.ll.'lt anrl StJJ the St'tUlltle, lcftrred to herem WN30