Tabell’s Market Letter – October 09, 1970

Tabell’s Market Letter – October 09, 1970

Tabell's Market Letter - October 09, 1970
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. ———————–, TABELL'S MARKET LETTER ., 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE MEMBER AMERICAN STOCK EXCHANGE r– October 9, 1970 As readers of this letter are by now aware, we have attempted, over the past two months, to adopt a constructive posture toward the stock market without succumbing to wild optimism as to the im- mipenQl o- La. — – – , …… — – –W—-e.-.-cQ-!llinue t9ma..i…l…–t-a–in- th-is—general attitud-.e-,.b..u..t.,..a-s- -,. –.—-,. market firmness continues, it would be imprudent not to, at least, examine the possibility that a new major upswing may have started from the May lows. The following is an attempt to consider this eventuality. To begin with, the market's behavior since May is rather neatly describable in mathematical terms. The advance has been contained in a trading channel some 60 points wide which has been rising at the rate of one point per day in the Dow-Jones Industrial Average. This rising trend has been consistent, without any indication of acceleration or deceleration. In other words, the up- ward slope of one point per day is just about the same whether one measures from the May low, the low of mid-July, or the low of mid-August. Since the trend has been perfectly consistent, it is easy to make projections into the future. If continued, the current trend would call for a Dow-Jones level between 854 and 918 six months from now and between 972 and 1035 a year from now. Conversely, the regularity of the trend channel means that its downside penetration would have a great deal of technical significance, and would lay to rest any thought of an immediate bull move. Since the downside limit of the channel, at the moment, is around 740, the risk in assuming its continuance does not appear great. Suppose, then, the market does remain in this upward channel. Is such action consistent with a, normal bull market Listed in the table below are some characteristics of all of the periods generally recognized as bull markets since 1932, with the present upswing, to date, listed for comparative purposes. As can be seen from the table, upswings are, in many respects, similar , – Their length, forexamp1e to ope trldjpg d,ws, tb.. . notable exceptions being the baby bull market of 1938, and the recent 1966-1968 advance. The percentage rise in each advance also shows remarkable conSistency with 1932-1937 (no doubt due to the severity of the previous decline) and 1966-1968 again being exceptions. (It is worth noting that the 1966-1968 advance was 48 in terms of the S&P 500 thus making it nearer the norm.) The average daily percentage rise has varied little in the post-war upswings running between 5/100 and 9/100 of 1 per day. It will be noted, of course, that the present advance is conSiderably steeper at 15/100 of 1, but bull markets tend to decelerate as they mature. Actually, the four previous bull advances were just as steep as the present one in their initial stages. of Previous No. of Aver. Daily Start DnA End DnA Adv. Loss Recovered Trading Days Rise 7-8-32 41.22 3-10-37 194.40 372 39 1390 .17 3-31-38 98.95 11-12-38 158.41 60 66 187 .24 4-28-42 92.92 5-29-46 212.50 129 181 1211 .07 6-13-49161.60 1-5-53 293.79 82 259 987 .05 9-18-53255.49 7-12-57 520.77 77 697 962 .09 1()-;2-57 419.79 12-13-61 734.91 75 312 1043 .05 6-26-62 535.76 2-9-66 995.15 85 150 912 .06 10-7-66 744.32 12-3-68 985.21 32 96 518 .03 5-26-70 631.16 10-6-70 ToDate,— 783.68 24 — 43 94 .15 – – If the present instance is, in fact, a bull market, we are thus able to make some estimates as to the sort of market action which would be consistent with past behavior. An expected length of 900 trading days would carry the upswing to the Winter of 1974. The normal daily percentage advance would call for a daily Dow rise of .32 to .54 points, a rate about one-third to one-half as steep as that of the past five months. Thus, the ultimate price objective would be somewhere in the 1000- 1200 range on the Dow. This would recover a bit more than 100 of the total ground lost — again consistent with past behavior. None of the above is meant to constitute a forecast. The evidence, while it accumulates, is not decisive. Nonetheless, it is in the nature of investing that one makes decisions in the 11ght of uncertainty. The point is that the holder of substantial amounts of cash is, at the moment, assuming the risk of not participating in a move of the magnitude described above. Dow-Jones Ind. (1200 p.m.) 774.23 ANTHONYW. TABELL S&P (1200 p.m.) 85.53 DELAFIELD, HARVEY, TABELL AWTmn No slatement or expreulon of opinion or any other matler herem contolned IS, or IS to be deemed 10 be, directly or ,ndirectly, an offer or the sollcllol1on of an offer to buy or ell ony SeCUrity referred to or menlloned The matter IS presented merely for the convenience of the subscriber While we believe the sources of our information to be relloble, we In no WJy represent or guorontee the accuracy thereof nor of the statements mode herein Any action to be taken by the sub 5crlber should be based on hiS own investigation and Informahon Montgomery, coff & Co, as a limited partnership, and In partners or employees. may noW have, or may later take, positions or trades In respect to any securltle5 mentioned In thiS or any future Issue, ond such pOSition may be different from any.vlews now or hereafter eKpressed In this or ony other Issue, Montgomery, Scott & Co, which IS registered with the SEC as an Investment advIsor, may gIve adVice to 11 investment adVISOry and ather customers Independently of any statements made In thls or In any other Issue

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