Viewing Month: July 1972

Tabell’s Market Letter – July 07, 1972

Tabell’s Market Letter – July 07, 1972

Tabell's Market Letter - July 07, 1972
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TABELL'S MARKET LETTER – — – ——- 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORI( STOCK eXCHANGe, INC MEMBER AMERICAN STOCK eXCHANGe July 7, 1972 Stock cmarketca ctionisoftenparadoxicai;' and-thepres entc!instanGe isa' particularly 'good -.-c – example. For the first time in a number of weeks the stock market managed, from a technical pOint of view, to do something moderately encouraging. Yet, and herein lies the paradox, the fact may hold unfavorable implications for the longer term. Actually, Thursday's rally in response to Vietnam peace rumors was encouraging only in a relative sense, since the market rose sharply from the bottom of the trading range which had contained it for some four months. Thus, with the advance, the market has refused, for the time being, to forge the ultimate link in what has, until recently, been an accumulating chain of discouraging eVidence. It is perhaps worthwhile at this stage to back up a bit and recapitulate some of the points this letter has been raising since early Spring. Since the beginning of March, it will be re- called, the Dow-Jones Industrial Average has remained in the trading range bounded by an intra- day low of 917.37, reached in May and approximately equalled in March and early June, and an intra-day high of 979.46 attained in the end of May and roughly equalled earlier in late April. Patterns on the other major indices have been roughly similar. While this so-called line formation was taking place, indices of internal market vitality were showing conSistently de- teriorating action. In the face of this deterioration, it was logical to theorize that the March- June period constituted a distributional formation with the consequent implication of lower prices. -vfEl,Nocwb,Utdietisspiintetetnh3setvi;ig;ogr,ofafthleearsatl,lyt,hantotthheingDohwasmraenaallgyedoctcourrereadc t h o dramat 917.75, ically alter tha within pennies tof-'-….\— the May low, at which point it held prior to the holiday and then moved upward in response to the peace news. Here, of course, is where the paradox occurs, because, if what we have been seeing for the past three months is, in fact, distribution, any attempt at a rally at this stage will simply broaden the potential top and make the ultimate downside reading even worse. It is, furthermore, highly difficult at this stage, based on the weight of present evidence, to visualize a rally which would do more than simply test the old highs, thus lending further cre- dence to the belief that substantive deterioration has been taking place since early Spring. One of the few major arguments (aside from the election-year pattern previously discussed at some length in this letter) against a market-decline at this stage is the almost total absence of the sort of speculative activity which has, in the past, generally tended to characterize major distributional periods. Here, of course, exists still another paradox. The market, for over a year now, has been in the group of what is, basically, an unfavorable supply/demand equation. This was true as early as the Spring of 1971 and it was, in our view, essentially this unfavorable supply/demand picture which explained the ISO-point decline in the Dow-Jones Industrial Average which took place during the Summer and Fall of last year. Available figures since that time strongly suggest that the basiC reason for the recovery was the sharp increase in margin-account debit balances which was able, in the period November, 1971-March, 1972, to override a basically unfavorable demand picture and push the market averages to new highs. Not.surprisingly-in view,ofthe-market' s recent action, -the -latest-available figures suggest – – — that the rise in debit balances has begun to slow down. Yet the increase in stock market credit since last November has been unaccompanied by any sharp rise in other signs of speculative activity suggesting that the rise constituted simply a recovery to relatively normal levels rather than an upsurge in speculative interest. Any further advance, it seems to us, would have to consist largely of a speculative wave which later would have to be liquidated. Thus, the market, at this stage, may be buying time but the price, as is often true 'in such cases, may prove to be expensive. Dow-Jones Industrials (1200 p.m.) 941.15 S&P (1200 p.m.) 108.87 AWTmn ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL No statement ar exprenlon of opinion or any other motter here'n contolned IS, or 1 to be deemed to be, directly or mdlrectly, on offer or the SOllCIlolion of on offer to buy or sell any security referred to or menhoned The molter IS presented merely for The convellence of the subSCriber While 'i'le believe tne sources of our Informehon to be relloble, we In no woy represent or guarantee tne accuracy tnereof nor of tne statements mude nerem Any action 10 be taken by tne subscriber snould be based on nls own inVeStigation and information Janney Montgomery Scali, Inc, as a corporotlon, and lIS offICers or employees, may now nave, or moy later lake, poslhans or trades In respect to any securthes mentioned In thiS or any future Issue, and such posItIon may be different from any VIews now or hereofter e)'pressed In tnn or any other Issue Janney Montgomery 5011, Inc, WhlCn IS regIStered WIth the SEC 0 an Investment adVisor, may give adVice to Its Investment adVisory and othel customers Independently of any statements made In thl or In ony otner ISsue Furtner information on ony security mentIoned herein IS availoble on request

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Tabell’s Market Letter – July 14, 1972

Tabell’s Market Letter – July 14, 1972

Tabell's Market Letter - July 14, 1972
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TABELL'S MARKET LETTER '– . -.l 909 STATE ROAD. PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE July 14, 1972 As of this writing (noon on Friday) the Dow-Jones Industrial Average continues to flirt with a down- – sidepenetration ofitsfour-J11onth ,tradingrang without dectsvely- achieving.such .a, pene.tration. The index, it will be recalled, moved to an intra-day low of 917.75 prior to the July 4th holiday; the – — firmed and rallied to an intra-day high of 948.15 on peace rumors following that holiday. Subsequently, it again tailed off and reached a new intra-day low at 912.93 on Thursday but, rather than decisively confirming that penetration, firmed slightly in early trading today. A market forecast, at any pOint in time, must address itself to two questions. First of all, what is the relative likelihood of higher vs. lower prices, and, second, given the likelihood of a move in one direction or another, how far is that move likely to carry 7 Our convictions as regards the first question should, by this time, be well known. Despite the attempts by the popular averages to hold within the March-July trading range, we shall remain convinced, in the absence of evidence to the contrary, that that range constitutes an area of distribu- tion. The evidence of internal deterioration which has accumulated during the four months in which the averages have remained locked in their sideways formation is, in our view, almost overwhelming. This has been reinforced in recent weeks by the rapid buildup of distributional patterns in substan- tial numbers of individual stocks. It must, therefore, be theorized that a high degree of likelihood points in the direction of lower prices. The second question, therefore, is How much lower 7. Let us start by detailing currently fore- seeable downside objectives for the popular indices. For the Dow-Jones Industrials various obJectives are readable in the 880-840 range. This would constitute a decline of 9 -13 from recent highs and 4-8 from current prices. For the Dow-Jones Transportation Index, the most plausible ' d owns-id eob ject-iv ei-s224Actu aHy–th is index'wa swi-thi-na n ce of–tha tobj ect!ve'a t-W-ed ne sdays low having already declined 18 from a high of 276 in May. The Dow Utilities have reached most downside objectives and are now in a strong support zone, having, essentially, been in a downtrend since the early part of January. The broader-based indices currently reveal less percentage risk than does the Dow. The top on the S&P 500, for example, does not indicate much worse than 102-101 vs. the current level around 106, and the New York Stock Exchange Index, at the moment, does not suggest prices much lower thm 56, a level at which strong support exists and one not that different than its current level just under 59. This general suggestion of lower — although not too much lower — prices is confirmed by an in- spection of individual stock patterns. As noted above, substantial distribution has occurred over the most recent period. But, despite the rapidity with which distributional patterns have built up, few of them appear to indicate drastically lower prices. Moreover, one must ask oneself, if sub- stantially lower prices are to be seen, what is to provide the downside leadership 7 It is not too much of a generality to say that the high-multiple growth stocks, where some fundamental vulner- ability might be theorized to exist, by and large, show few signs of more than minor distribution. On the other hand, those unexploited issues with low multiples, while continuing in downtrends from a technical point of view, appear to present a minimum of further downside potential on a fundamental basis. This paradox may, for the time being, constitute a source of strength. If it is our forecast that, however likely a decline might be, it is likely to be relatively insigni- ficant,should if not consthiite'sertsible-j'iolicyto'prepare-fO spenacash-reserves on any m-oderately lower prices which might develop 7 Certainly, the general scenario we have outlined would appear to point in this direction. However, even were the market immediately to move toward the objectives discussed above, we would be reluctant to be aggressive buyers in long-term accounts in the absence of convincing technical evidence that the situation had, indeed, reversed itself. Action during the Summer and Fall of 1969 constitutes one recent example of a market which apparently was making attempts to bottom, only to suffer an ultimate and more vicious downward leg. In fact, if the market does move down, it is precisely at this point that we expect the truly difficult investment decision will have to be made. The holding of reserves at the present moment is a matter of simple prudence. The question of whether those reserves should be spent if the market moves lower may well be the most difficult question that 1972 will poise. Dow-Jones Industrials (1200 p.m.) 920.08 S&P (1200 p.m.) 106.74 ANTHONYW. TABELL DELAFIELD, HARVEY, TABELL AWTmn No stolement or expressIon of opinIon or any olher motter hereIn contolned IS, or IS 10 be deemed 10 be, dIrectly or ind,rectly, on offer or the solICItatIon of on offer to buy or sell any secunty referred to or mentioned The mOiler 15 presenled merely for the conver'lenCEl of the subscriber WhIle we believe Ihe sources of our Informa lIon 10 be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any octlon 10 be token by the subscriber should be based on h,s own Inveshgotlon and Informotlon Janney Montgomery Scoil, Inc, os a corporatIon, and lis offICers or employees, may now have, or may later toke, posItions or trades In respect 10 any seculles mentIoned In Ih,s or any future Inue, and such pOSItion moy be dIfferent from any vIews now or hereafter e,pressed In thu or any other Issue Jonney Montgomery Scott, Inc, whIch IS regIstered WIth Ihe SEC 05 on Investment adVisor, may gIve adVice to 115 Investment adVISory and othel customers Independently of any statements mode In thiS or In any other Issue Further information on any security mentlaned hereIn IS avollable on request

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Tabell’s Market Letter – July 21, 1972

Tabell’s Market Letter – July 21, 1972

Tabell's Market Letter - July 21, 1972
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TABELL'S MARKET LETTER ; 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORI( STOCI( EXCHANGE, INC MEMBER AMERICAN STOCI( EXCHANGE July 21, 1972 We have been taken to task of late by some of our economist friends for our obvious lack of enchant- ment regarding the near-term future for stock prices. They inform us with great certitude that the economic outlook,for19 72cJs excellel).!andindeedthaJther,,ext,,ts jlstrongpro!lp!,,c,t(or,J!!rther cexpaps ion ,in 19,3,. How, then, they ask, can the course for stock prices be anything but an' upward one — , '-; '- Ironically, we have absolutely no quibble with our economist cohorts concerning the rosy business outlook, and our own economic data strongly suggest the likelihood of a relatively bright business picture. Having said this, it next needs to be noted that it is almost totally irrelevant to a forecast as to the course of common stock prices. One of the hardest-dYing myths in the financial community is the one that implies a short-term relation- ship between economic activity and stock prices. Inordinate amounts of time are wasted forecasting the economic outlook and attempting to relate this forecast to a stock price projection despite the fact that all available data indicate that the relationship is tenuous, at best. Ironically, the National Bureau of Economic Research includes the S&P 500 as one of its 12 leading economic indicators, thus using stock prices to forecast the economy rather than the other way around. Yet, Wall Street clings blithely to the delusion that stock prices cannot go down in the face of rising earnings or up in the face of declining ones, despite the fact that they have repeatedly been doing just that for years. As we have stated in this letter in the past, we prefer to regard the primary force acting on the aggregate level of stock prices as a supply/demand equation. When the supply of new common stock exceeds the demand generated by that component of national savings available for common stock purchases (in- cluding those made through financial intermediaries such as mutual funds, pension funds and insurance companies) the pressure on the aggregate level of stock prices will be downward. When the reverse 1S the case, it will be upward. This will tend to make itself felt in the average price/earnings ratio or the price actually being paid for a dollar of common stock earnings. G…NF. , C o r , p . o r a t e Eam-l,ngs P-!-E.Rat-io ,- ( Blllion) Chge Profits Chge ofG.N.P. S&P500 Chge S&P500 1950 1955 1960 1965 1967 284.8 37.7 13.9 2.69 7.6 398.0 40 46.9 24 11.8 3.65 35 12.5 503.7 27 49.9 6 9.9 3.10 -15 18.7 684.9 36 76.1 52 11.1 5.25 69 17.6 793.9 16 78.7 3 9.9 5.54 6 17.4 1968 865.0 9 85.4 8 9.9 5.92 7 17.5 1969 1970 931.4 974.1 8 5 85.8 75.4 -12 9.2 5.55 -6 7.7 5.34 -4 16.5 17.2 1971 1046.8 7 85.4 13 8.1 4.91 -8 20.7 1972-E 1160.0 11 93 8 8.0 6.25 27 16.9 The table above shows some relevant economic figures starting inl950 and going through 1972 estimates. As can be seen, G. N. P. has been increasing steadily over the period as have corporate profits. As can also be seen, those profits, as a percentage of G. N. P., have been declining steadily ever since 1950 despite a mild recovery in the early 1960's. And, indeed, corporate profits for both 1971 and 1972 should be at a percentage level not much greater than the new low reached in 1970. Earnings for the S&P 500 Stock Index which series roughly parallels corporate profits, are shown in the last column, and the final column indicates the price being paid for these eamings, 1. e., the pie ratio for the S&P 500. As should be quite obvious from the table, the bulk of the rise in s t 0 c k prices since 1950 has been due, not to increased profits, although profits have, indeed, moved up substantially, but to a dramatic in- crease in the price being paid for a dollar of profits. Indeed, this price was at.a new,high in the fourth ..,. ..,. . oI.-.- quarter of 1971, and is still not particularly low even taking into account the optimistic profits outlook for the coming year. One of the central tenets of this letter for some two years now has been that the equity supply/demand equation has been drastically altered from the one which existed throughout the 1960's. While we are willing, therefore, to share the economist's belief that earnings may continue to increase on into the early 1970's, we are less convinced of the implicit assumption that the price of those earnings (roughly 17 for one earnings dollar in terms of the S&P 500) will continue to be a viable one. The price earnings ratio for the S&P 500 was around 7 in 1950 and over 20 in 1971. The point is that neither figure is glven from on high as the permanent price at which earnings must sell. Thus, a protracted period during which earnings increase and stock prices remain stable or increase at a somewhat lesser rate 1S not to us at all unthinkable. Indeed, in the light of available evidence, such an environment may constitute the most plausible forecast. Dow-Jones Industrials (1200 p.m.) 909.69 S&P (1200 p.m.) 105.68 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWT'mn No stalement or expreSSion of opinIon or ony other matter herem contolned lS, or IS 10 be deemed 10 be, dIrectly or indirectly. on offer or Ihe 501'(lloon of on offer 10 buy or sell ony security referred 10 or mentIoned The moIler IS presented merely for Ihe convenience of the svbscflber While e believe Ihe sources of our Informo tlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any actIOn to be token by the subscriber should be based on I-IIS own investigation and Informallon Janney Montgomery Scott, Inc, os a corporation, and Its officers or employees, may now have, or may later toke, positions or trades In respect to any securities mentioned In thiS or any future Issue, and such pOSitIOn may be different from any views now or hereafter expressed In thiS or any other Issue. Janney Montgomery Scott, Inc, which IS registered With the SEC as on Investment adVisor, may give adVice to Its Investment adVISOry and otnel customers Independently of any statements mode In Iha or In any other nsue Further information on any seC\Jf1ty mentioned herein IS available on request

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Tabell’s Market Letter – July 28, 1972

Tabell’s Market Letter – July 28, 1972

Tabell's Market Letter - July 28, 1972
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE July 28, 1972 oO —Welo6nhet occationl1ls-t weeKt6 aliver ours-eives of-a–n'iimbe-rof'0mtty-op1nions on-the c interrelationship of economic news and stock prices. The basic conclusion of our remarks was that the economic outlook, admittedly favorable, should be taken into very little account in fore- casting the intermediate-term course of stock prices — these prices being determined by more fundamental supply/demand forces. Our carefully reasoned opus went to the printer at noon on Friday whereupon, in Friday afternoon's, Monday's and early Tuesday's trading, the Dow-Jones Industrial Average promptly advanced some 30 pOints — specifically in response to unexpectedly favorable economic news. So much for the hazards of pontification. It is now necessary to make an attempt at assess- ing what it all means. To begin with, there is no doubt about the fact that the six-month eco- nomic figures were good. The rise in G. N . P. was in line with the most optimistic expectations, and the surprise element in the news was, of course, the reduction of the rate of inflation. We doubt, however, that all of this is of sufficient magnitude permanently to override the fundamen- tal forces which we discussed at some length last week. The market now leaves us with a number of unanswered questions, the first of which centers on whether last Friday's reversal constituted a bottom of. at least, intermediate-scale propor- tions. In order to answer this question we must digress for a moment on the general nature of market bottoms. They are, basically, of two types. The first type arises from what is common- ly termed a deep oversold position, there being various ways of measuring objectively whether sucha-pOS1t1on -exists-.-Wnen itaoes exist-(May, 100TO was a typical exam-pIe 6f'ftie- genre)'the n technician is more inclined to trust any significant rebound as marking what may be a turning point. The second variety of market bottom (November, 1971 being an example of this type) takes place without the attainment of such an oversold condition, In such cases, the analyst must be more skeptical and demand of the market more eVidence of a true turn before committing himself to the position that a reversal may have, in fact, occurred The unavoidable risk heFe is of failure to recognize a bottom until significantly after the fact. But it is necessary to assume this risk in order to avoid being ensnared by every minor rally that takes place within an intermediate downtrend. If last week's action proves, in fact, to be a reversal, it will be one of the second type. The market was not in anything approaching a deep oversold position when it turned last Friday, and we are, therefore, inclined to demand more evidence of staying power for the rally before theorizing that the basic investment picture has drastically changed. Such evidence has not, as of this writing, been forthcoming. The advance petered out in late Tuesday's trading and has been unable, so far at least, to get underway again. There is also room for some feelings of skepticism regarding the advance itself. 'For example, on Monday, a day in which the Dow- Jones chalked up its biggest advance of the year, 7 of the 10 most active stocks failed to advance on the day. Some investors quite obviously had been awaiting a firm market into which to sell stock. How much'strength would be required-to-c0l1stltute-reversalevldence -'A'decislve mave— above 950 on the Dow would probably indicate the evldence of, at least, a short-term uptrend and a possible test of the prior highs. In the absence of this confirmation and/or further bas- ing action, we would be inclined to treat last week's advance with some skepticism. The final question, of cours e, is whether, if a short-term reversal does take place, the basic doubts expressed by this letter since May would be allayed. We do not think so. The evidence of distribution that has accumulated since March is formidable, and it will require a great deal more than ability to mount a short-term advance to alter that evidence. Even were we convinced of the imminence of such a rise, we would heSitate in utilizing it as anything but a vehicle for the most nimble of traders. Dow-Jones Industrials (1200 p.m.) 926.25 S&P (1200 p.m.) 107.22 ANTHONY W. TABELL AWTmn DELAFIELD, HARVEY, TAB ELL No stotemenl or expression of opinion or ony other matter herein (onlllned IS, or 1 to be deemed to be, directly or Indirectly, on offer or the SOllCIIoilon of an offer to buy or sell ony security referred to or mentioned The matter IS presented merely for the conver'lenCe of the subscfIber While we believe the sources of our Informa tlan to be reliable, we In no way represent ar guarantee the accuracy thereof nor of the statements mude herein. Any action to be token by the subSCriber should be based an hiS own Investigation and information Janney Montgomery SCott, Inc, as a corporation, and Its officers or employees, may now have, or may later take, pOSitions or trades 1n respect to any securities mentioned In thiS or any future Issue, and such position moy be different from any views now or hereafter e1pressed In thiS or any other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as on Investment adVisor, may give adVice to Its Investment adVISOry and othel customers Independently of any statements made In tF-us or In any other Issue Further Information on any security mentioned herein IS available on request ,

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