Viewing Month: September 1970

Tabell’s Market Letter – September 04, 1970

Tabell’s Market Letter – September 04, 1970

Tabell's Market Letter - September 04, 1970
View Text Version (OCR)

———– ———— '——-.—–, ,.— TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE MEMBER AMERICAN STOCK EXCHANGE September 4, 1970 When Philip had news brought him o'f divers and eminent successes in one day, '0 Fortune!' said he, 'for all these so great kindnesses do me some small mischief. ' For the past-month' iii tnfs letter;-wenave- Plutarch -deal of t-ime' the news of divers and eminent successes in the financial markets, even going so far last week as to announce our belief that the 1968-1970 bear market had passed from the scene and that we had entered a new investment phase. We confess that, along with Plutarch's Philip, we would feel more comfortable about the stock market were it, at some point in the next few weeks, to do us some small mischief. Let us back up a bit and review what has taken place since May 26, 1970. On that nowmemorable day, the Dow-fones Industrial Average reached a closing low of 631.16 and has since moved ahead to around 768. The S&P 500-Stock Index at the same time advanced from a May low of 69.29 to a peak of 82. Quick calculation shows the percentage advance in the Dow to have been greater, about 21, than the comparable 18 rise in the more broadly-based index. Despite the fact that the blue-chip-dominated Dow has apparently led the market out of its slough of des pond, this leadership appears slowly to be shifting. Following the initial market rise in late May and early June, both the Dow and S &P retreated to secondary lows during the first week in July, the Dow at 669.36 and the S&P at 71.23. Since that time the percentage advance in the two indices has been approximately equal at about 15. On a very short term basis, there is some evidence that, in the past week or so, the broader indicators have actually begun to outperform the Dow. Based on our technical work, we wouldexp,ecCthistendency-1ocontinueoverthe near-term-.– -Aswe hav; the tipside for- the DJIA appears to be 768-775, a level which was touched by intra-day peaks in last week's trading. Both the S&P 500 and 425Industrial Stock indices appear to have a bit more room on the upside with objectives of 85-1/2- 87 and 93-94 respectively versus levels of 82 and 90 at the end of this week. We suspect that this apparent shift in investment emphasis comes from the recent short-term resurgence of the glamour segment of the list, the large senior growth companies which are unrepresented in the Dow and which carry a reasonably heavy-weight in the various other indicators. We reiterate our belief that this is only a temporary phenomenon. If the motto of today's youth is Never trust anyone over 30, our own inclination at this stage is not to trust pie ratios over 30. It is not, in other words, our belief that, out of last year's leadership, next year's leadership will come. In summary then, most major averages are at or close to their most plausible upside objectives. Higher readings are admittedly discernable — one interpretation of the DJIA pattern, indeed, would call for as high as 885. However, it would be impossible to read any objective of this magnitude in the more broadly based indicators without some further consolidation and this, we think, is likely to require time. We have reiterated the thesis that, as a preliminary to any sort of major upswing, a protracted base-building period is required. Such a formation, it seems to us, is going to require at least some retracement of the ground already covered between the -low 600's this'ground may-have tO'be retraced, we do not know. No top of any importance has yet formed, and it is impossible to set downSide targets until one does. But our overwhelming impreSSion is that individual base patterns need broadening before any important advance can be mounted. What we are trying to do here is set the stage. Stock market psychology is a fragile thing, and an intermediate period of lower prices would be a difficult time for many investors. Any temporary cessation of the three-month-old advance would undoubtedly bring the Cassandras out of the woodwork, howling about further legs in the bear market. In such a period, the courageous and intelligent investor will have to recognize the second half of 1970 for what it really is — part of a long-term accumulation area — and take action to build his portfolio accordingly. Dow-Jones Ind. (1100 a.m.) 768.55 S&P (1100 a.m.) 82.51 AWTmn ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No statement or expression of opinion or any other maHer herein contolned IS, or 1 to be deemed to be, directly or indirectly, on offer or the soliCitation of on offer to buy or sell ony seomly referred to or mentioned The matter Is presented merely for the convenience of the uhs.crIOOr wrnre we believe the sources of our Informollon 10 be relloble, we In no WJY represent or guoran!ee the accuracy thereof nor of the statements mode herein Any action to be token by the subKflber should be based an his own mvesllgahon ond Informotion Montgomery, Scott & Co, as 0 limited partnership, ond Its portners or employees, moy now have, or may loter toke, positions or trades In respect to any securities menlloned In thiS or any future issue, and such POSition may be different from any views now or hereafter exprened In thiS or ony other lSue Montgomery, Scott & Co. which IS registered with the SEC as on investment advisor, may give adVice to Its Investment odvisory and other customers mdependently of any statements mode In this or In ony other Issue

Download PDF

Tabell’s Market Letter – September 11, 1970

Tabell’s Market Letter – September 11, 1970

Tabell's Market Letter - September 11, 1970
View Text Version (OCR)

p ,.. ' ,p P(…… – . ….I \ . ., , … ……., ' , , ri L. -. '0 .- f.) . 909 STI' E ROI\D PRINceTON New JEHSEY D1Vl310U Of p..CMOLR NEW YOfH' S'OCI C,(CHANGE MLMBER STOCK r.XCHANGC September 11, 1970 As market technicians, we are, along with the majOlity of our fraternity, firmly committed to the principle of relative strength. This principle slates, in its simplest form, that above-average indIvidual s to,;- ilion .te09 s)o , relative action, it is necEssary to consider a fairly extended time p2riod. All too often, we find, in- vestors'confuse short-term flurries with real relative strength lmprovemenL As an illustration of this, let us compare the mar!et action over n.e past couple of years of three stocks along with the S&P SOO-Stock I;'ldex. We think the three issues chosen are each representative of a broad class of issues whose market action has been Similar. The f,rst table below shows the pnGe' of the three issues at vanous points over the past two years, and the s8cond gives the percentage change over various time periods. Price At 1.1I1g Temco 12/68 Hiqh 11 0 1/70 Hiqh 24 5/70 Low 7 8/10 Low 11-/2 Recent High 15-7/8 Phillips Xerox S&P 500 39 95 108.37 25 116 . 93.46 20 70 69.29 26 65 74.13 28-3/8 81-7/8 83.78 ' Chanoe from 12/68-1/70 lL70-5/70 5L70-8L70 8L70 -Date 5/70 -Date IDO -Date 10i 8-Q.ate LIng Temeo -78 – 71 64 38 127 -34 -86 Philllps -36 -20 30 -19 42 4 -27 Xerox -22 -40 -7 26 17 -29 -14 8&1' 500 -14 -26 7 13 21 -10 -23 In the first phase of the bear mdrket, from December, 1968 through the recovery high in January, I 1970, Xerox was by far the best-performing issue, actually moving ahead m the face of a severe down- 'rcmco-swIng7..0wnereus -dr-op-ped '-alm6-st three tilnes ak' lrluch -as-1he ald Lirig- — 1' disaster, losing three-quarters of its value. In the bear market's second phase, the S&'P dropped 25 from its early 1970 high. Ling Temco continued on its downward spiral with ,mother 70 loss. However, Xerox's relative action deteriorated as the stock showed a 40 loss, and that of Phillips improved WIth the decline beIng less than that of the general market. From the May 10VJ, prices recovered sharply in June and July dnd then sank to a s(condary bottom in August. Between these two dates Ling Temco suddenly became the star performer, rebounding 65. Phillips, the best performer on the previous decline, scored a 30 advance while Xerox contInued to move lower. Phillips' action, of course, was a tYPlCal example of releUve strength during a bear market carrying over into the initial stages of the next upswing while the Xerox weakness is an instance of the opposite case. Ling Temco, on the other hand,demonstrdtes another phenomenon, the sharp re- bound from a deep-oversold condition. Th difficult problem in identifying moves such as this one is timing. The bounce from the May low in Ling Temco was highly dY;'lamic, but, if the buyer had been a bit early, say by a week, nis purchase would have shown a Joss rather than 11 profit. For the most recent period, from the August lows to the highs of last week, Ling Tenlco has continued to show above- average action, Xerox has come to hfe with a 26 advance, while Phillips has moved essentially side- ways. Now, however, let us compare the action of the three stocks over longer time periods ending with recent prices. Going back to the May Jow, Ling Temco, for what it's worth, is the star performer. this semi-spurious comparison, however, the reJative strength of Philllps, with an advance better than twice that of the Index, becomes clearly apparent; ..c – ,, ' Phillips' strength is equally apparent if one goes back to January. Since then, the stock has scored a 14 advance vs. a 0 decline in the market and drops three times as great In the oiher tv.'o issues. However, over the whole cycle, Xerox has shown the superior action with the smallest bearmarket loss of the three issues. In summary I Xerox, the best peliormjng issue over the very long tefftl, began to show detcriordting etlan as early as January and has reversed this trend only over the past three weeks. Phillips'reliltive (1CilOn, on the other hand, has been improving since early this year and anI'! minor evidence of deterior- ation in recent weeks is evident. And Ling Temco, despite its recent great 5t1'011gth, still shows extrelllD– ly poor actlOn on a long ..term basis. lIntll further relative. improvement in issues such as these last two takes place, our inclinution is to view those stocks with patterns such as Phillips as being the most 'Jttractive investment vehicles. DOW-Jones Tnd. (1100 a.m.) 762.12 8&P (jl00 a.m.) 02.49 ANTHONY \IV. TIIBELL DrLIIfICLD, HARVey, TIIBILL AW1'.mn . – – , M !. ItI' 'II 1 'f'''' ,I ,'t ,,,.,, or ,'1 ,,'I'r ttl'! I\,.'-,n (on' lit,' Ii I ,), 'J L.. ,I, I- – ; , ,I.,II) 1,0' IIv cr IU',P ,1)'. (1\ P, , '. f Ir I, ,,1.11011 0 til f,' I,,,,.II' II) I 0' 'il 01'1 'r H' I,' rl 0 P' n Il m,j lIr' ,('lll)r IS plf'''lll …1 mCld, j'Jt rh,' , Jlwr 110( of rh. \','h,I'l It (' bI,v' Ill' If , ,d!I')U t) I, ,,,'!1 1- \ ' ,., I,D Jo' I 'r '111111 ..,, Ih, t,((''''''V 11.,1 f II,,, orn,J htli'm AllY '1 10 1)1' ll, II I Y fhe .,,1,1 j, 1,C!..- J 'II I,,; , 'n, 'I' 1,'wL ,)' ,t, 1 tl' (', ' ,\,1, r., vr I, ….IIl '1'.01 ,r,krrtnlllfl U,(lI 'Y, ,v, Co, I'll I'td P. (,wi 0' ,ny .11 f .J! rt In 1'1 ,., 'mnrd m IIs or lilY I', l (!Illi ,,,I'Oll tl\ 'Y Il' d,f/f''' nl It …, lnl \1,,, .It titf't 1' ,' IU 11,,\, 't'l .-11t,., .. 'I. , …. , …. 10,,1, '\ \IIHI II,,' ',It; ,-. I(lVtJ'!olllllt U,I'II(lr. 'H(11 n,f! nd\',rf' In , 101 ,I 1',,' 'II, \ n, lInn-'- I 'oily cd '111'0' ,,1'''''111, ,d.' !I' 11,. ,f rl!1l '''h'.f ….. .

Download PDF

Tabell’s Market Letter – September 25, 1970

Tabell’s Market Letter – September 25, 1970

Tabell's Market Letter - September 25, 1970
View Text Version (OCR)

..– – – – – – – – – – – – – – – – , 'U'lUIUED..D..' S D..1E'U'VrElR2 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE MEMBER AMERICAN STOCK EXCHANGE September 25, 1970 The baby calf spawned last May 26 is beginning to grow horns and display some highly I1,!asc,-!lipe characterisUc;s. In,a dramatic burst of strength last- week stock market,. which -had– been consolidating in a narrow trading range since the end of August, burst ahead on a broad front. The advance, this time, was more apparent in the S &P 500 Stock Index than in the Dow as the S &P reached a new recovery high at 84.31 on Friday whereas the blue-chip index still remained below its September 8 peak of 773.14. In the course of the advance, the market showed the typical bull-market characteristic of ignoring bad news and concentrating on good. The flames of war fanned the Middle East, yet the market's only response to the conflict was to beat an orderly retreat within the confines of the aforementioned trading range. Then, in response to favorable business news and a less-thanexpected rise in the cost-of-living index for August, prices took off on a broad front. The character of the rally since last May has been good. The present upswing is the fifth minor advance within the context of the intermediate-term uptrend, a factor in itself an indication of s,trength. (Weak rallies have only one or two legs.) The corrections following these advances have generally been minuscule. The Dow declined 4 from June 3 – 12 and 7 between June 19 and July 7. A 3.8 drop took place in early August, and the recent decline was only 3.3. None of these drops have lasted longer than two weeks. The vitality, indeed, has been impressive. Meanwhile, the market's underpinnings have been strengthened. Our unwillingness over the past month to forecast substantially higher prices (1. e., above the low-to-middle 800' s) was based on the fact that only a small minority of stocks pos-sessed worthwhile long-term base patterns. That the.llC!.st.tew Jponth s.., A great manysto.cksst1ll haye . -patterns inco'nsistent with much higher prices, but'the extent of accumlllation that has taken place in recent weeks is impressive, and probably, at the moment, somewhere from one-third to one- half of the list shows base formations indicating, at least, worthwhile intermediate moves. We are still, however, inclined to view the intermediate term with some caution. This is based, not only on technical factors, but on the business-and-earnings picture as well. Part of the rally, as we indicated above, was in response to improving business news. But, in this connection, it is well to remember the adage about the stock market's never discounting the same thing twice. At the end of June, the Dow-Jones Industrial Average had earned 53.43 for the prior 12 months and was selling for '12.8 times those earnings. As September ends, it has moved up some 80 points in the face of the fact that 12-month earnings for the third quarter are likely to be down, perhaps in the area of 52.50. Thus, the Dow pie has increased from 12.8 to around 14.8. This sort of action is totally consistent with historical experience. In 46 quarters since 1953 when earnings have declined, the earnings-multiple has moved ahead in 35 of them. The average advance in the pie in those quarters was almost 12. The market, historically, recognizes earnings declines as tempcrary phenomena and is willing to place a premium multiple on lower levels of earnings. As earnings advance, however, the response tends, to be the oppOSite. Dow earnings have moved ahead in 96 calendar quarters since 1935, and in 65 cases, the multiple declined, the average drop being 7.3. Even inthe minority.ofcases where.the.multiple has . with-earnings, the average advance, 4, has-been small— . – –.- -' -.- – This has some applicability in the present case, since, barring a protracted automobile strike, earnings are likely to bottom out in the fourth quarter and should certainly advance somewhat in the first quarter of 1971. In view of the past record, it is difficult to foresee a Dow multiple at the end of the year of much more than, say, 16 which, assuming earnings of 53, would result in a price of around 850, not too far away from the objectives indicated by our technical work. Further improvement will, it seems to us, require an accelerating rate of business improvement during 1971, and, with the recovery still in its early stages, it is difficult to forecast how fast such improvement may take place. Dow-Jones Ind. (1100 a.m.) 761.02 S&P (1100 a.m.) 84.31 AWTmk ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No statement or exprenlon of OPInion or onv other motter herein contolned Is, or IS to be deemed to be, directly or indirectly, on offer or the soliCitation of on offer to buy or sell any security referred fa or mentioned. The motter Is presented merely for the convenience of the subscriber While we believe the sources of our mformatlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mode herein Any action to be taken by the sub scriber should be based on hiS own Investlgahon and Information Montgomery, Scott & Co, as a Irmited partnership, and Its partners or employees, may now have, or may laler toke, positions or trades in respect to any securitIes mentioned In thiS or any future Issue, and such position may be different from any ,views now or hereafter expressed In this or any other Issue Montgomery, Scott & Co. whleh Is registered with the SEC as an Investment advIsor, may gIVe adVice 10 Its Investment adVISOry and other customers 'Independently of any statements mode In t''IIS or in any other Issue

Download PDF