Tabell’s Market Letter – December 11, 1970

Tabell’s Market Letter – December 11, 1970

Tabell's Market Letter - December 11, 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 December II, 1970 Now that the dust has settled, it is possible to stand back and take a look at the rather amazing stock market action of December, 1970 and try to assess its probable significance. As we all are awa re by now, during the last week in,November and the first uP.–PWther'more;-umntupalot. OnNovember'rS;–just we ov ek er ;f December, 1970, the Dow closed at 754.24. It advanced for the next 12 consecutive days reaching a closing high on Mon- day of this week of BIB. 66 for a total percentage rise of almost B. On none of the last 11 days of the rally were there fewer than BOO advances on the NYSI;, and on two days the number ot advances exceeaed 1000. The 1244 rising stocks on November 30 set an all-time one-day record. Volume on the rise approached record levels and dally volume twice exceeded twenty million shares. In the process, the industrial index moved to a new high for the year, making it likely that 1970 may go down In history as an advancing year, a prospect which, In May, seemed, to say the least, remote. Comment on the performance was mixed. There is a school of thought, admittedly dWindling, which seems to feel, that, for some reason, It is Immoral for the stock market to go up at this point, and commentators of this persuasion tended to shrug off the performance. The more bullish were inclined to proclaim a new era. The true Significance of the rally can, we think, be understood by placing It in historical context. In order to do this, it is first necessary to answer two questions. (1) Was the advance really unusually large by historical standards (2) If the answer Is yes, what has been the past Significance of rallies of this magnitude In answer to the first question, the best measure of the magnitude of any short-term rise is the peak average dally advance. In the present instance, this was chalked up for the 10-day period ending December 4, during which time the daily average advance was .797 on the Dow. Scanning stock market history since 1942, we find that this is only the twentieth time in 2B years that any rally has posted an average daily advance greater than .7 for an B-12-day period. Thus, the rally was quite clearly unusual in a historical sense. — – tlle-ilistorlcalsignificance;' tiien;hat has been th-e aftermath' of upswJ;;'gS(;f -thi; type The following table lists all of the 20 rallies cited above, together with the market action which followed. PEAK AVERAGE DATE OF RALLY LOW & HIGH IN DJIA DAILY ADVANCE SUBSEQUENT MARKET ACTION !)June-July 1942 102 – 108 .73 Bull Market Ending At 212 in June 1946 2) Mar-April 1943 3)Aug-Sept 1945 4)January 1946 5) November 1954 129 – 136 160 – 178 189 – 203 353 – 3BB .74 …B3 .7''' .B2 Bull Market Ending At 525 in April 19 56 6)March 1955 7)November 1955 391 – 415 454 – 487 .74 .B8 8)December 1958 466 – 499 .73 Bull Market Ending At 744 in Nov. 1961 9) November 1960 575 – 612 .74 Final Phase of 1961 Bull Market to 744 I OJune-July 1962 535 – 590 1.14 Bull Market Ending atlOOO in Feb.1966 I lOct-Nov 1962 558 – 630 1.04 u 12) Nov-Dec 1963 13)Oct-Nov 1966 711 – 767 749 – B20 .B6 .70 Bull Market Ending at 985 in Dec. 196B 14)January 1967 785 – B47 .77 15)Mar-April 1968 I 6) October 1969 825 – 910 820 – B60 .97 .B2 Market RallIed, Then Declined to 631 In May 1970 17)May-June 1970 – 27 Rally to BI8'ln-Dec;-'1970 – – , – 18)July 1970 669 – 735 1. 23 19)August 1970 707 – 765 . B9 20)Nov-Dec 1970 754 – BIB BO 1\.0 the tAble hows, large short-term rallies have tended to occur almost exclusively at major bottoms, or in the early stages of bull markets. There are only two exceptions, January, 1946, when a rally occurred fairly near the top of a four-year upswing, and, most recently, in October of last year where a sharp rally preceded the decline to the May lows. The November, 1960 advance occurred fairly close to the end of the 1961 bull market, but It preceded that market's most dynamic phase. It is also in- teresting to note that a series of advances of magnitude equivalent to this one have occurred since the lows of last May. A repeated series of powerful short-term rallies has, recently, tended to occur around market bottoms, i.e., 1962 and 1966-1967. We thus feel that the present rise Signifies not an unhealthy condition, but the sort of latent buying power which, in the past, has fueled bull markets. We think that the strength shown In recent weeks strongly suggests a highly' 'positive market environment for 1971. Dow-lones Inc. lilOO a.m.) B25.5B ANTHONY W. TABELL SA&WPT(m1n00 a.m.) 90.18 DELAFIELD, HARVEY, TABELL No statement or expression of opinion or any other maller herein contained IS, or IS to be deemed to be, directly or mdlfectly, em offcr or the soliCitation of on offen to buy or sell any sncunty referred to or mentioned The matter IS presented merely for the convcnlence of the subSCriber While we believe the sources of our ,nformatlon 10 be reliable, we In no way reprcsent or guarantee Ihn accuracy thereof nor of the statnments made herein Any action to be talen by the subSCriber should be based on hiS own Investigation and Informatlon Montgomery, Scott & Co, as a limited partnership, and Its portnnrs or employees, may now have, or may later take, 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 Inue, Montgomery, Scott & Co, which 1 regIstered w1th the SEC as an Investment adVisor, may gIve adVice to lis Investment advISOry ond other customers Independenffy of any statements mode In thiS or In any other Issue

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