Tabell’s Market Letter – March 02, 1973
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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 March 2, 1973 – We have s uggesleorrl th'e 'PaSt' that' fbf piij'Po es-of' srock mark'ef ariaysis ,-a s K1ngtl1e trghe questions rates a close second in importance to getting the right answers. The market seems to'us at the moment to be posing two relatively crucial questions. The fact that both are, based on data currently in hand, essentially unanswerable does not, in our view, distract from the necessity of framing them. If nothing else, such framing will make clear what we should be looking for as stock market action unfolds. The first relevant question is, of course, the obvious one, centering on where and when the steep stock market slide which began in mid-January will bottom out. As we have previously noted, we think that this question is easier to answer from a timing point of view than in terms of an ultimate downside objective. The market has now reached the sort of oversold condition that has occurred in a relatively few, easily identifiable periods in the past, and the length of time that such periods have, historically, persisted is limited. Already such a condition has obtained for the entire month of February, and persistence of this sort of thing for much longer than six to eight weeks has, on the record, been relatively rare. It would thus be logical to assume that at least a temporary hiatus during the month of March might ensue. All of this, however, says nothing about the level at which a bottom might take place. Another documented characteristic of oversold conditions is the ability of the market to plummet precipitously while these conditions exist. February's market was just another in a long series of examples which have documented how, under certain conditions, huge losses in security values can be posted over relatively short periods of time. Thus while it is reasonable to assume the decline may cease before – –to()many'days' have-pa s t7it4 is—st1l1lue'stiunabI1l7We'-thlni';'wneth-erth-e-cess-aUon wl1l-take-pla-ceat levels anywhere near present ones. We are already being treated to the familiar spectacle of sporadic attempts to bottom. We saw a relatively spectacular one in early February, following the resolution of the international monetary crisis. If failed after three days, and the market moved lower. Another attempt was made on Wednesday and ,Thursday of this week when the Dow moved up over a twenty-point range. This attempt also fizzled. lis this is written Friday, another attempt is underway. Contrary to widely-held belief,there are no fixed rules as to what shape a bottom may take. Serious declines have, on occaSion, ended with highly visible and obvious selling climaxes, MayJune 1970 being a notable example. However, bottoms have often been less obvious, and it is often necessary to wait a good many days after the fact before trying to pinpoint them. The second major question being posed, we think, relates to the nature and importance of the bottom which will ultimately take place. As long as one continues to view the present decline in the framework of a minor drop occurring in the advanced stages of a major bull market, it will be inferred that the bottom will not be a particularly important one. There is now some evidence, at least, that the present decline is a good deal more severe than that. We cited last week the sharp drop posed by our cumulative index which continued to slide this week to a level below 840. That index has now lost some 215 points from its 1971 high. To put this in perspective it should be noted that the total drop in the 1966 bear market was only 285 points from an approximately similar level. Viewed m terms of this severity then, the ultimate bottom could come to have more significance than, have hitherto have been willing to ascribe to it. Yet it must also be noted that, other than the severity of the decline, precious few of the phenomena that one might expect to accompany a major bottom have so far been present. Institutional cash position remains low, customer debit balances began a mild decline as recently as last month, and short 1nterest has to date risen practically not at all. Thus the question of the significance of the coming bottom, as does ,the question of its level, remains essentially unanswered. There are periods when it is unwise to be dogmatic in absence of hard evidence, and the present one is, we think, a claSSic example. Refuges from the market's current uncertainty are available not only in the obvious form of cash, but in the form of solid values with relatively low market volatility. We would prefer to utilize these refuges until the current Situation clarifies itself. Dow-Jones Industrials (1200 p.m.) 949.80 S & P (1200 p.m.) 110.92 AWTrk ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No statement or expression of opiniOn or any other motter herem contained IS, or 1 to be deemed to be, directly or Indirectly, on offer or the so,cllol,on of on offer to buy or sell any security referred 10 or mentioned The motter IS presented merely for the converlenclO of the subscriber While we believe the sources of our informa- tion to be reliable, we In no way represent or guorantee the accuracy thereof nor of the statements mode herein Any action to be token by the subSCriber should be based on hl own Investigation and Informalion Janney Montgomery Scott, Inc, as a corporation, and Its off,cef or employees, may now have, or may later toke, posItions or trades In respect to any seCUflhes mentioned In thiS or any future Issue, and such posilion may be different from any views now or hereafter expressed In thiS or any other Issue Janney Montgomery Scali, Inc, which IS registered With the SEC 0 on Investment adVisor, may give adVICe to lIs ,vestment adVISOry and olhel customers ,dependently of any statements mode In thiS or In any other Issue Further ,formation on any security mentioned herein IS aVailable on request