Tabell’s Market Letter – November 12, 1971

Tabell’s Market Letter – November 12, 1971

Tabell's Market Letter - November 12, 1971
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,——————— – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – .——,— TABELL-S MARKET LETTER , I t -, 909 STATE ROAD. PRINCETON, NEW..JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCK eXCHANGE, tNC. MEMBER AMERICAN STOCK eXCHANGE – Issuance of a market forecast at this time is, actually, a fairly easy task. November 12, 1971 Now that statement 1s not made simply to raise the hackles of investors who watched their port-folio values erode' Iurtherlast weeK, as the' DrIApluriged to 'a riew 1971low. -It Is;father, inea'iini-' – – suggest that periods of sharp price erosion such as the present one are relatively rare in mar k e t history and, on those occasions when they do occur, a number of reasonably consistent behaVior patterns are recognizable. It was recognition of this fact which led us purposely to equivocate, last week, as to whether the rally which started on November 2, constituted the bottom of the 1971 price slide. We indicated that, indeed, a number of classic technical requirements for a selling climax had been fulfilled on that upswing, but we also suggested that there was ample historical precedent for bottoms to take place with more than one such selling wave. We pointed out that a number of indicators, while deeply oversold, had, as of lst week, refused to suggest an imminent reversal and noted, Before too long, (these indicators) will have signalled a definite reversal or, by their failure to do so, have indicated a continuation of the decline. Quite obviously, that continuation is suggested by last week's action. The first thing a study of previous markets as deeply oversold as the present one tells us is the absolute futility of trying to pinpoint exact downSide objectives. Quite obviously, from this point, selling momentum should continue to build until that level is reached at which demand for stocks will be sufficient to turn the market. What we can recognize from a study of market history is that whatever low is going to be reached is likely to be reached fairly soon. The market has been in a deep oversold condition for more than two weeks now and a period of much longer than a month in such a condition,is a fairly rare phenomenon. Furthermore 'owe have now reached the stagewhre—f the ultimate rebound, when it comes, is likely to be more powerful the lower the market goes. Thus, the market climate, near term, may not be pleasurable, but it is almost certain to be exciting. As to what happens after the ultimate reversal takes place, it is, of course, too early to make any but the most speculative guesses. It is not too early, however, to suggest a couple of factors which we think will be crucial to determining market action in the first half of 1972. As we all should be aware by now, the basiC forces behind the stock price weakness since last Spring have been continued public 'disenchantment with the equity market and a reduced institutional participa- tion which was not sufficient to take up public selling along with the rising level of new issues. Thus, to a great extent, in our view, the prospect for better future stock prices will hinge upon a reduced supply of stock coming from individuals and/or an increase in overall demand for U.S. equites. It is easy to suggest the factors that might produce these two phenomena. Quite obviously, public funds have been diverted from the stock market in recent years by, among other things, record yields available from bonds. Were bond prices to continue their recent improvement, it seems to us axiomatic that the level of public equity sales might well be substantially reduced. On the demand side of the equation, the investor most conspicuous by his absence from the recent stock market scene has been the foreign buyer, obviously due to the uncertainty surrounding international monetary conditions. It seems, therefore, reasonable that continued lower long-term interest rates, coupled with a solution to international monetary problems, could exert a powerful upward force on the stock market over,thenext,year , .. '-' Meanwhile, a few unanswered questions remain as to the present decline. One of this downswing's pronounced characteristics to date has been the miniscule extent to which it has affected a substan- tial number of stocks. Despite the fact that the averages are now at the lows of a vicious drop, now more than six months old, a substantial number of issues are within a few points of their 1971 highs. It may be, of course, that the final phase of the downswing will catch up to these relatively resistart stocks and eventually sweep them along with the tide. There is certainly -ample precedent for this in the past. And yet, another unique factor about this decline, and indeed about the advance which pre- ceded it, was the complete absence of any speculative phase — the sort of thing that normally brings about the final wave of liquidation. It is, therefore, at least, possible that a fairly substantial number of issues will weather what remains of the current debacle relatively unscathed Dow-Jones Industrial (Noon) 807.68 S &P (Noon) 91. 48 ANTHONY W. TABELL AWTmn DELAFIELD, HARVEY, TABELL No statement or expreu,on of oplnlo'n or any other motler herein contc.ned IS, or IS 10 be deemed 10 be, directly or indirectly, on offer or the 501lc,lo1I0l of on offer to buy or sell cny seamty referred 10 or menlloned The moiler IS presented merely for the converlenq; of the subscriber While we believe the sourres of our Informo- han to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any achon to be taken by the subSCriber should be oosed on hIS own InvestIgation and Informallon Janney Montgomery Scoll, Inc. 05 a corporation, and Its officers or employees, may now have, or may later toke, positiOns or trades In respect to any secufltles mentioned m thiS or any future Issue, and such position moy be dIfferent from ony views now or hereafter expressed m thiS or any other Issue Janney Montgomery Scali, Inc, whICh IS reg.ucred With the SEC as on Investment adVisor, may gIve adVice to Its mvestmenl adVISOry and other customers mdependently of any statements mode In thIS or In any other Issue Further mformatlon on any scamty me'ltloned herein IS aVailable on request

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