Tabell’s Market Letter – August 21, 1970

Tabell’s Market Letter – August 21, 1970

Tabell's Market Letter - August 21, 1970
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…. . …. .-, ,.. '.of' , 1 90!) ROAD PRINe-ETON nIV'SION or- JERSIV 00'40 MlLMorR NEW STOCK MEtlER AMeRICAN STOCK CXCHANGC August 21, 1970 One major recent change in the technical action of the ,stock market is that it seems to have become a bit more reliable. Short-term downside projections which, during 1969-1970, 5mer.o.,way, t.atipn s.. t9 downside objective of the Ju y top in the the Dow reached an intra-day low of 702.83, moved sideways for a couple of days, and promptly produced a four-day advance which took the index to a new recovery high. As we noted last week, the market is now approaching a very interesting and crucial test, and we have some confidence in that test's being successf1JI. Our upside objectives for the Dow center on the 775-825 area, and recent technical action has given us no reason to think that this target might not be attained. Vve are assuming, therefore, that, within the next six weeks, concrete evidence of the bear market end may be at hand. Assuming th1S evidence does emerge, the problem becomes to guess what shape the new stock market of the early 1970's will take. If one were to rely on the predominant experience of this century, the end of the bear market should signal, quite simply, a bull market — in other word s, a move by the popular indices to and through the old highs. It is interesting to contemplate thi s prospect, sin c e it is, at the moment, the one possibihty almost nobody ilppeilrs to be hedged against. The number of investment milllilgers who accumulated cash at the bottom and who would be further embarrassed holding that cash through a protracted up- swing must be legiol1, However, while the thought is emotwnally satisfying, it must be admitted that ',here is nothing in the present tecpnJcal pattern which would suggest that a major advance is in the offing. OUf reading of this pattern leads us to go along with the populilr view that a protracted period of base building is required, -a'pp-e-iiI'st5'be-wnat ,-fflCluCli'figours-elves'; ore, fact, forecasting, it is worthwhile trying to get some idea of just what such a period might look like. There are, over the past 50 years, only two instances of a protracted reaccumula- tion formation following a severe decline. These are 1938-1942 and 1946-1949. We have, therefore, constructed '. in the tables below, two forecast models which show where the Dow would be at various dates in the future, if the percentage retracement swings of these two eras were precisely duplicated. 1938-1942 MODEL 1946-1949 MODEL Rate DJIA Date DJIA June 1970 713 September 1970 784 July 1970 664 November 1970 630 December 1970 852 februalY 1971 801 May 1971 715 September 1971 647 October 1971 842 December 1971 847 July 1972 679 November 1972 620 December 1972 776 June 1973 692 September 1973 747 June 1974 609 A few interesting facts may-be noted. first-is the accuracy oLbathmodels todate. ,The 1938-1942 model forecilst a rise to 713 in June, and the actual high was 720. It then called for a July decline to 664 and the actual July low was 669. It is also interesting to note that both models suggest a continuation of the present advance over both the near and intermediate terms. The 1946-1949 model would have us at 784 next month, and the 1938 model would call lor 850 by the end of the yeilr. The 1946 model would take! u8 above 800 by carly 1971. Both models would indicate that, while prices below current 1evel s arc probabl e, they are unlikely to be seen for some time. Certainly we are not forecasting either model will be duplicated precisely. Markets SImply do not behave that way. But, in view of the larClC numbC'l of analysts claiming thilt il protructed basing. penod is needed, the models glve us an Ideo of precisely what we orc talking about when we speak of such a period. Dow-Jones Ind. ( 100 a.m.) 735.90 8&1' (J100 I.m.l 78.29 AWTmn ANTHONY W. Tl\BILL D ILAFl CLD, BflRny, 'fflIlCn' Il.t n, P'f'fil 01 01011 01 (I',,! Qt; , 1'1'111'-' 1''''Clfl rr)II'nI,' I. D, ,\ to I,, t dl'c!,. Of ,d,r.rlly. 'Ill r,If, fir 11,,, 'OI,roIol',,1' .,1 nil (,tt(' 10 It' or Ullf i'(,llty r;f ..pd 10' or U'lcr.\!olwd lhf' m'l Itoupo!,,,n 1,1 rl' 1'.I,r,hl!', W'J …. 110 \'.t1 0' oun,on\N' In,.,,,(y 1'11,, lil,.,,! (or 11 Ifr lhc Gf ffln ,hrroi,,r 1,,,I,,,v,' file ,,( ,,..,d, I,eln '.n'! (IeIIO'1 to lit' I. f Ih,' 'h , .-,, r''''(1 'nV',rll,jj,of1 lnd ,I .,,,)II')I /,\clq'''''''Y', rICO'. . '-0. In lilli'''!'' fl(l,,,,,,,dl1f'. nile! !,oIm'I' r ,,,, y ',,,' il' m,,), hhr jrJ\r, C. f,,'If'nllt.!r e, 'n 10 eml i,' 111 m lny vll,Pf 1,'11 Mffljf'Clm('ry. n.''''.'I'''.! ,., ' f. (, .. \'10 1 secm onrl Sl.rh wllh Ihe un muy bf' d,\I('I'''( f,,')n onl .''' …. wlQ 1'1(11 gl'/e wI … 10 ,j. ,,,I… ,I II r md'lp.-d,, Iy of ully s' 'no, Ie 1 e, 1 th,', .. …

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