Tabell’s Market Letter – February 05, 1971

Tabell’s Market Letter – February 05, 1971

Tabell's Market Letter - February 05, 1971
View Text Version (OCR)

TABELL'S MARKET LETTER 909 STATE ROAD PRINCETON, NEW JERSEY 08540 DIVISION OF MEMeER NEW YORK STOCK EXCHANGE MEMBER AMERICAN STOCK EXCHANGE February 5, 1971 Those who are forced to comment daily on the action of the stock market have always had our sympathy. In the bulk of instances, the significance of a given day's action is either limited or -obscure. . and, under these c..onditions, it becomes difficult to find a theme around which to build a– -;——- — —- -,– ———– 0- – – —- .h . -nomarket commentary. Over the past couple of weeks, however, such dlfficulfy-l1a-s preseiitee – , itself, since it was easy to center market comment on one obvious facet — the new record levels of trading volume. And volume has, indeed, been setting records. The 22,030,000 shares which changed hands last Tuesday constituted a new peak in daily trading activity, and, in the week ending January 29, 100,870,000 shares were traded on the New York Stock Exchange, an all-time record for a one-week period and the first time in Exchange history that weekly trading had passed the 100,000,000 mark. Indications are that this mark will be exceeded this week. Since volume statistics obviously fall within the province of the stock market technician, we feel our responsibility to comment there on, and a few preliminary thoughts are offered herewith. They can be summarized as follows 1) There is absolutely nothing historically unusual about the current high level of activity, 2) it isn't all that high anyway, and, 3) it is probably going higher. First of all, trading volume is, at least to some degree, a reflection of the total number of shares listed. This latter statistic has been a constantly increasing one ever since the 1930's. As a consequence, there has tended to be a secular rise in trading volume. The rise actually was dampened somewhat through the 1950' sand 1960' s by a sharply decreasing rate of turnover so that volume in those years did not actually increase as fast as did the number of listed shares. Since 1960, the rate of turnover has gradually increased and appears to have entered a slow secular up- trend although at current levels — an annual turnover rate of around 20 of total shares listed — it has still done no more than return to where it was in the late 1940' s. In any case, though, the conrbmation ofgrOwing-USfings anafising turnover oBviously wil1 terrene' proaUce'increased- tfa(r— ing activity. Moreover, sharp increases in volume are a normal concomitant of the early stages of almost all major upswings. The rise, so far, can even be called modest when conSidered by historical stand- ards. Our practice is to smooth New York Stock Exchange volume by conSidering it on a 25-week total basis. As of the end of last week, volume for the past 25 weeks had risen to 1,650 million shares, up moderately from the 1970 low of 1,270 million shares. Now, it is almost inevitable that this figure will rise further. If volume remains steady around recent levels, it should rise within a couple of months to above the 2,000 million share level. This 32 advance will hardly be abnormal. From mid-1964 to 1966, for example, 25-week volume doubled, and between 1953 and 1954, it increased by more than 150. We would, therefore, not be at all surprised to see activity increase sufficiently to bring the total 25-week figure to close to 2,500 million shares some time in 1971. Such a figure would imply a few peak days where daily trading approached the 30 million share level. Moreover, as we suggested above, despite the records being set on the New York Stock Exchange, total securities market activity is still well below past peaks. American Stock Exchange volume, although it has just recently started to increase, had recently been running at the 3- 4 million share level as compared to peak days in excess of 10 million shares in 1968. Over-The-Counter activity, while not measurable, is quite obviously running far, far below the level of a couple of years ago. rs-iStsi ntcreu ec'us irgr enni ft itcraandCi neg activit Some y li when ghtis cshloedse'loyntahneaSily.tzuedatiisonnio;t Yrcetailvliydianlgl tthacttsiuvriptriysinign,towuhPastitdheeann,ct-1 downSide volume. It is interesting to note that, while total volume is currently in the process of setting records, downSide volume, again measured on a 25-week basis, has been decreasing steadily and last week declined to its lowest level since early 1967. This phenomenon, also normal in the early stages of bull markets, has at least negative Significance since it strongly tends to suggest a lack of immediate vulnerability in the present market situation. Major tops in the past have inevitably been accompanied by one of two events, a sha. rp increase in downside volume while total volume remains steady, or, alternatively, a decrease in upside activity. Neither phenomenon has yet taken place, and it would take at least six months for a reversal in volume trends to be completed. The strong implication of today's volume statistics, in other words, is that the current upswing still has a relatively long life ahead of it. Dow-Jones Ind. (1100 a.m.) 872.74 ANTHONY W. TABELL S&P (1100 a.m.) 96.46 DELAFIELD, HARVEY. TAB ELL AWTmn No statement or expressIon of opinIon or ony other molter herem contained Is, or IS to be deemed to be, directly or Indirectly, on offer or the 501lcdollon of on offer to buy or sell any security referred 10 or mentioned The motter ! presented merely for the convenIence of the subscnber While we belreve the sources of our information to be reliable, we in no way represent or guarantee the accuracy thereof nor of the stotements mode herein Any action to be token by the sub scriber should be based on hIS awn rnvestlgatlon and Informatron Montgomery, Scott & Co, as a lImIted partnersh,p, and its partners 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 posrtion may be dIfferent from any vIews now or hereafter expressed In thrs or any other luue. Montgomery, Scali & Co, whICh IS regIstered WIth the SEC as an Investment advrsor, may gIVe adVIce to Its investment adVISOry and other customers Independently of any statements mode In thIS or In any other Issue

Download PDF