Tabell’s Market Letter – March 12, 1971

———-'———————————————————————- —- TABELL-S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE MEMBER AMERICAN STOCK EXCHA.NGE March 12, 1971 Following the three-.eek period of torpor,. a weeJ ago, volu.me has, returned, t; .the …, –'-''- vhich elidd — – ' ..0,.- . – – – —— —-…; st)('m1i1'ket,–althOugh;tnis-time;-the frenetic -pace of trading has been accompanied by a good deal – .-less upside progress. Most comments on the week's tradmg activity seemed to center around the attempts of the Dow-Jones Industrial Average to break the 900 level, a price level repeatedly attained during the week on an intra-day basis, but which, through Thursday at least, could not be achieved at the close . . A good deal of talk about 900, of course, was based on nothing more than the theory, which has always been somewhat incomprehensible to us, that a three-digit number ending in two zeros some- how has more significance than any other. It does, however, happen that the general area around 900 in the Dow does have more than passing importance and the reason for this importance is worth discussing. The reason the present price area is of considerable Significance is that it represents the most important level of overhead supply with which the 1970-1971 bull market has had to contend in its short nine-month life. The concept of overhead supply is, of course, basic to technical analysis. The theory states Simply that when a stock — or an index — trades at a given price level for a protracted period of time and then moves lower, any subsequent attempt to penetrate the original price level will be met with some difficulty. The reason for this lies firmly grounded in human behavior. A stock- holder who sees his stock hold between, say, 45 and 50 for some time and then break sharply to 30 is going to berate himself for not having taken the repeatedly-offered opportunity to dispose of his holdings above 45. It fOllows that any return to that level may well stimulate him to sell, and, if a 1- ..dsiurf-feiectiernptronpuemrtbioenr 'ao-fl.i.tnov4eshteoarmsouancttothfitsrwaadyi,ngs'utphparlytoits5kthpursaccereaattlende, 'oarnidgltnhael amount of su j)i'lce level. pT;p';ll1hy,e-it;sli;e-'o-ry-',…,….. operates in exactly the same way on an average such as the Dow. Now, for the three years, 1967-1969, during which the distribution leading to the 1969-1970 declIne took place, the Dow held in a range between 760 and 990. The following table breaks this range down into IO-point brackets and shows the number of trading days and the total volume in millIons of shares which changed hands at each of these various price levels. The numbers speak for themselves. The market spent more time trading in the 900-910 range and traded more volume at that level than any of the others. And, in fact, 38 of the tradmg days and 39 of the volume in 1967-1969 was spent inthe area between 880 and 930, precisely where the average is today. As the market attempts to chew into this supply, it is logical to expect heavy offerings and thus high volume with little upside progress — precisely what is, in fact, taking place. Price No. Days Vol. This of Tot. of Tot. Level This Level Level Days Volume Price Level No. Days Vol. This of Tot. of Tot. This Level Level Days Volume 760-770 770-780 I 1 12.840.14 11.88 0.14 0.15 0.14 880-890 890-900 56 57 621.37 666.86 7.70 7.84 7.48 8.03 780-790 11 132.07 1.51 1.59 900-910 64 738.97 8.80 8.89 790-800 8 88.54 1.10 1.07 910-920 49 597.65 6.74 7.19 800-810 17 190.63 2.34 2.29 920-930 55 646.75 7.57 7.78 810-820 17 168.20 2.34 2.02 930-940 40 472.28 5.50 5.68 820-830 830-840 27 278.45 3.71 44 469.11.-.,6,,05 3.35 940!950 26 333.04 3.58 4.01 5. 65 ……….950,-96026 349-;-683584–21- 849.J'850 56 567.59 7.70 6.83 960-970 20 291.10 2.75 3.50 ,.s50-860 42 428.21 5.78 5.15 970-980 11 180.78 1.51 2.18 ,,,860-870 48514.426.60 6.19 980-990 4 61.980.55 0.75 870-880 47 486.70 6.46 5.86 TOTAL 727 8308.36 100.00 100.00 As we have suggested before, we expect the present test ultimately to be successful, at least in- sofar as the averages are concerned. We are, however, more skeptical of the ability of a number of stocks to penetrate comparable overhead supply and believe that, as this supply is reached, the market will enter a much more selective stage. The past nine months, dunng which almost all stocks shared, to a greater or lesser degree, in the general ebullience, are unlikely to be repeated. Dow-Jones Ind. (1l00 a.m.) 897.18 S&P (1100 a.m.) 99.25 AWTmn ANTHONY W. TAB ELL DELAFIELD. HARVEY, TABCLL No statement or eypreSSlOn of opiniOn or ony other moltl!' herein contolned IS, or IS to be deemed to be, dtrectly or indirectly, an offer or the sollltctlon of an offer to buy or sell cny security relerred to or mentlaned The matter IS presented merely far the canvellence of the subscnber While we believe the sovres of avr Informahon to be reliable, we In no way represent ar guarantee the aC(uracy thereof nar of the statements mude herein Any action to be taen by the svbscreber shovld be based on hiS own Inveshgallon and information Janney Montgomery (;Oit, Inc, as a corporation, and lis officers or employees, may now hove, or may later tal.e, pOSItions or trades In respect 10 any secvrmes menl10ned In thiS or any Ivture Issue, and svch position may be different from any views now or hereafter expressed In thls or any other Issve Janntly Montgomery Scott, Inc, whICh IS registered With the SEC as on Investment adVisor, may give adVICe 10 liS Investment adVisory and othel cvSlomers Independently of ony statements made In thIS or en any other Issue Further Information on any securety mentioned herein IS ovalloble on request