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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER New YORK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE r– My 5, 1972 It all began, hindsight tells us, around March 6, some two months ago. Through that date equity markets had been in an uptrend as pleasant as any investor would have a right to desire. For some five months, the Dow-Jones Industrial Average had remained within the confines of an uptrend chan-tlen'lS il\(rat-lne 'fafEnrf'Cpproximately r'17-poir'itspetdlfy, 6nitswaytochalking'up'1l-21 'advance- – from the November low. This trend had as steep an upward slope as almost any intermediate-term advance on record. Throughout the period November 23-March 6, breadth action was well above aver- age with advancing stocks regularly exceeding declining issues by a wide margin. And, as the ad- vance moved ahead, a gratifying number of issues were pushing forward to new 1971-1972 highs. Then, in early March, an abrupt reversal of momentum occurred. This reversal has been perhaps less apparent on the surface than when one examines underlying market statistics. In terms of the averages, action has hardly been all that bad. Indeed, the Dow, currently, is at approximately the same level as It was when the whole process started. The first phase was a consolidation during which the Dow held roughly between 950-930 for the better part of the month of March. This was followed by what seemed to be a strong advance to a closing high of 968.92 on April 18. Following that high, in late April and early May, the Dow declined back to the 950-930 support area afforded by the March consolidation. As we suggested above, however, this innocuous performance by the averages masked consider- able underlying deterioration. Throughout the 17 trading days of the March consolidation, declining stocks on average exceeded those advancing by 175 issues per day. On 12 of the 17 days of the con- solidation, more stocks declined than advanced. Despite the apparent strength of the April rally, ad- vancing stocks tended to exceed declining ones for this period by only 120 issues per day, and In the most recent market period the average daily number of advancing issues has been 543 vs. averaq declines of 896, a pluraility of 353 declining issues. . . . N0rdG4hec-StatistiG-S-on.new-J1ighs-andIGws-hold.any .great-..GOmfort.ur..ingtheearlyApriL…a.d, . vance as the market was sailing to new peaks, an average of 61 issues a day were posting new 1972 lows. And, in the period since April 19 an average of almost 100 issues a day have been moving to new lows. A host of other statistics could be cited but the conclusion is obvious. The supply/demand equation, quite obviously favorable through early March, has altered dramatically since then, for reasons as yet unclear. Two questions suggest themselves. The first is Why and the second is What does it all mean As to the first question, we do not subscribe to the currently-fashionable theory which blames everything on the Vietnam situation. The existence of the Vietnam conflict is undoubtedly one of the most tragic and divisive forces affecting American life today. This does not make it a scapegoat for what is going on in the stock market. More fundamental, we think, is the fact previously suggested in this letter that, since November, a high level of individual stock demand, especially from margin buyers and foreigners, has been sufficient to offset reduced institutional purchases of equities and a relatively high supply of new common-stock issues. This was evidently true through March, during which month purchases from the above-mentioned sources continued at record levels. April figures will not be available for another few weeks and it will be interesting to see whether they show any change in this buying and selling pattern. If they do, it will be a source of some disquiet. As to the meaning behind the past two months' action, a number of considerations suggest them- selves. The unfavorable implications of the recent deterioration could be cancelled in one of two ways. The first would be a show of above-average market strength. This appears an unlikely even- tuality in the light of recent market behavior,.but it could, of course, .occur. Pardoxically, the.othe!. factor which would clear the air would be an immediate and fairly steep market decline. One of the plus factors inherent in the current situation is the fact that, through March, the market was acting so well that present dlstributional tops have had only two months to form. An immediate sharp de- cline would cause most issues to reach the downside objectives of those tops. In terms of the aver- ages, if such a decline were to occur, it might reach the 890-880 level,and it is difficult at the moment, at least, to envision a drop exceeding these proportions. Perhaps the worst sort of action would be continued consolidation around current prices while the underlying deterioration, evident since March, continues. This sort of action would serve only to broaden the distribution that now exists. Thus, while the current market outlook cannot be termed unfavorable, it is, for the first tlme In seven months, in a posltion where it could deteriorate appreci- ably. Dow-Jones Industnal (1200 p.m.) 943.26 ANTHONY W. TABELL . DELAFIELD, HARVEY, TABELL S&P (1200 p.m.) 106.74 A/TR1fi No tatement or expression of opinIon or ony olher maHer herein contolned IS, or is to be deemed to be. directly or indirectly, an offer or the solicltotlon of on offer to buy or 5e1l any secvrily referrecl 10 or mentioned The mailer IS Fesented merely for the converlena of the subSCriber WhIle we believe the Ources of our Informa han 10 be rehoble, we In no way represent or guarantee The accuracy thereof nor of the statements mude herein Any actIon to be token by the wbscrlber should be based on hiS own investIgatIon and Information Janney Montgomery Scalf, Inc, as a corporation, and ,Is offIcers or employees, may now hove, or may later toke, posItions or trodes In respect to any sea/rltles mentIoned In thIS or any future Inue, and such POSlt,on may be different from any vIews now or hereofter expressed .n thiS or any other Issue Janney Montgomery Scan, Inc, whIch IS registered WIth the SEC 0 on Investment adVIsor, may gIve adVIce to .IS onvestment adVISOry and otne, customers independently of any statements mode on Ih.s or In ony other issue FUr1her onformat,on on any securIty mentioned herein IS available on request.