Tabell’s Market Letter – November 05, 1971

, ..- r – ! L TABELL-S MARKET LETTER '– –' 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCI( EXCHANGE. INC MEMBER AMERICAN STOCK eXCHANGE It was a hair-coloring product which popularized the phrase Does She or Doesn't She. Last week Wall Street was playing the game of Was It or Wasn't It. The question in this case referred to whether the intra-day low of 814.69 reached on Tuesday constituted the final culmination of the dizzy slide in stock prices which had brought the Dow down from 950 last April and 920 just two months ago. Those hoping for a definitive pronouncement from this quarter will, we are afraid, be disappointed. We will go so far only as to ansv.er It might well have been. The rebound, for example, was nowhere as near definitive as, say, those last few days of May, 1970, during which the Dow plunged some 75 points over a seven-clay period and then recovered all of the ground lost over the next four days. At that point, it was obvious to almost anybody that something important had certainly occurred. Nonetheless; last week's action, if short of totally convincing, was highly impressive . .Mter a precipitous 13-point drop on Monday, the market continued its slide with a further seven-point decline on heavy volume in Tuesday morning's trading. Then, with the tape running late on the upside, the entire decline was erased, and prices remained firm on light volume throughout the afternoon. On Wednesday, as major institutions which had been closed for the election-day holiday returned to work, prices were strong from the opening bell and, by the end of the day, the DJIA had managed to post a 14-point gain. The gain was further extended to an intra-day high of 855.21, forty points above the low, 1 -2!1..!I!.urE.sIy;, bef9rllness.st inJ!.E.!!!ursday and Friday, —I It is not stretching a point too much to say that the action at mid-week met the classic technical requirements for a selling climax. Such a climax requires the following pre-conditions. 1) The market should decline on heavy volume. 2) A rally on equally heavy or heavier volume should then take place. 3) The rally should follow through in subsequent trading. Most of the requirements were met. Heavy volume is, of course, an imprecise phrase and Tuesday's 13 million shares was hardly impressive by m 0 s t standards. It did, nonetheless, represent an increase from recent levels, especially during the early part of the day when 7.6 million shares changed hands in the first two hours vs. only 10.9 million shares the entire day before. Allowances must also be made for the fact that Tuesday was, for many, a holiday. Furthermore, the Wednesday rally, the second biggest of 1971 to date, was also impressive. Now so-called multiple-climax declines are not unknown, and it would certainly not be unprecedented for the drop to resume and repeat the whole process undergone last week on a more grandiose scale at some lower level. It may, for example, be significant that a number of indicators of public bearishness, such as odd-lot short-selling, had not, last week, reached levels normally characteristic of major bottoms. More important, oscillator-type indicators, while deeply oversold, were stubbornly refusing, a,s of Friday, to suggest an imminent reversal. In the present instance, time is likely to be on the investor's side. Before too long, the indicators referred to above will have either signalled a definite reversal or, by their failure to do so, have indicated a continuation of the decline. Furthermore, we have, in the past, pointed out that the,rally.in.a,bear.market is,one.of.the,great,mythical,beasts.of steck.marketTtheory.-Bear—- -markets tend to get to where they are going with very little in the way of intervening rallies. Therefore, the longer the market can hold and consolidate its gains the better shape it would be in. One of the final tests of the May, 1970 bottom was a small decline in early June which, unlike previous declines, did not plunge through prior support levels but ihstead quickly reversed itself. Such a test in the next week or so would be impressive eVidence in the present case. Dow-Jones Industrial (Noon) 836.67 S&P (Noon) 94.14 AWTmn ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No statement Of expression of opinion or any other matter herein conTolned is, or is to be deemed to be, dIrectly or indIrectly. on offer Of Ihe sollcltollon of on offer fa buy Of sell ony secuflty referred to Of mentioned The motler IS presented merely for the convcr,ence of the subscriber While -Ne believe the sources of our Informaon to be reliable, we In no …..oy represent or guarantee the atcurocy thereof nor of the statements mude herein Any action to be token by the subscriber should be based on hiS own Investigation and mformatlon Janney Montgomery ScOIl, Inc, as a corporollon, Clnd Its offlters or employees. may now have, or may laler lake, poSitions or tradcs In rcspect to any securities mentioned In thiS or any future Issue, and such position may be different from any views now or hereafter exprcssed In thiS or any other Issue Janney Montgomery Scott, 1m , which IS registered with the SEC as on Invf!stmenl adVisor, may give adVice to Its Investment adViSOry and other cvslomers Independently of any statements mode In thiS or In any other Issue Fur1hcr Information on any SCWflty mentioned herem IS available on request