Tabell’s Market Letter – July 06, 1973

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF' MEMBER NEW YORK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE July 6, 1973 With the dismal stock market action of the past six months showing few signs of abating, there has been a-tendency on the -part-ofa number of commentators to-begin ,grasping -at straws. It being,July,. . one of the straws currently being embraced most avidly is the one concerning the likelihood of a so- called summer rally. We did a study of the phenomenon in th,S space just over a year ago and the general conclusion of the study was that the theory of a summer rally had some basis in fact, but that it would be unwise to lean upon it too hard as a market forecasting tool. The following table is an up- date of the one that appeared a year ago, with the changes for 1972 having been included. ONE-MONTH PERIODS TWO-MONTH PERIODS Ending Month January February March Advances 31 26 26 Declines 16 21 21 Avg. Chge. 0.77 0.03 -0.19 Advances 31 26 23 Declines 16 21 24 AVQ. Chge. 2.18 0.79 -0.27 April 27 20 0.95 29 18 0.84 May 25 22 -0.73 29 18 0.46 June 22 25 0.86 23 24 0.08 July 32 15 2.25 30 17 3.07 August 32 15 1.93 September 20 27 -1. 33 October 25 22 -0.52 November 28 19 0.83 35 12 4.35 — '28 19 0.53 , 23 24 -1. 79 29 18 0.37 December Total 36 Jl 330 234 1. 32 0.51 32 …li 2.20 338 226 1.07 peThieoLdtf,;,o-rnbl-l1L9S2h6owtso t1h9e-ha.c'tFioon';oaftchhe pDeroiwd-Jtohnees;I;n;d;busrtrfiall;;A-svtaercai;g'ee iwnheevnetrhy-onaer-mkeofnath-davnadnctewao-a-nmdonth—I declined is shown, together with the average percentage change for the period. A preliminary look at the table, indeed, supports the notion of a probable summer rally. The average monthly advance for the Dow over the period has been. 5 whereas the average performance in July is an advance of 2.25, more than four times as great. Llkewise, the average advance of 4.35 for the two months ended August is four times larger than the average two-month advance. It would, indeed, appear that the expectation of an advancing market during July and August has some solid grounding in fact. Having made this statement, however, a few doubts must be raised. The first factor which needs to be pOinted out is that a large part of the high average advance for the summer period rests on the accident of the 1932 bottom's having occurred at the end of June. Thus, July and August of that year produced the largest two-month advance in stock-market history, an astounding 70 rise. If this single year is eliminated from consideration, the results for July and August are much closer to normal. Secondly, while it is true that July and August do show significant pluralities of advancing months over declining months, it must be remembered that advancing periods tend to outnumber declining ones over the 46 years by almost three to two. When standard tests of statistical significance are applied, the period with the clearest seasonal action is the month of December, which is why this letter has always emphasized the importance of the year-end rally. Likewise, the tendency toward a declining market in September is statistically more significant than that of a rise in July or August. Interestingly enough, none of the other months show any discernible seasonal pattern whatsoever. Lastly, in looking for seasonal patterns, it is wise to examme the most recent data to see if it –seems to'b-,; deviating fromth'e'past and/ mdeed-this is'a'pparent1y;–th-e-case;- The-seven years between 1966 and 1972 have produced two rallies and five declines in July and five rallies and two declines in August, and the two-month period ended August has produced three rallies and four de- clines with an average advance of just 1. Even the familiar December rally appears to have lost its recent reliability, and, interestingly enough, a new seasonal tendency, not heretofore apparent, seems to be emerging–that of a decline in May-June. Every May, from 1965 through 1973, with the single exception of 1972, has produced a declining market,and all two-month periods ending in June have shown declines for the past nine years. The moral of the whole exercise, we suppose, is that the stock market is a difficult and changing beast, and, while certain seasonal tendencies are apparent, they constitute only on factor in what is invariably a highly complex equation. Dow-Jones Industrials (1200 p.m.) 872.14 S & P Compo (1200 p.m.) 101.48 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWTrk No stotement or expreslon of opinIon or any other matter herein contOlned IS, or IS to be deemed to be, directly or Indlrectl!. on offer or Ihe soliCitatIOn of on offer to buy or sell any security referred to or mentioned The moiler IS presented merely for the converlenCE of The subscriber Wh, e Ne believe the sources of our Informa lion to be rellClble, we m no way represent or guarontee the accuracy thereof no' of the statements mude herein Any action to be token by the subscriber should be based on hiS own Investlgahon and 'nfOrmallo'1 Janney Montgomery ScOll, Inc, as a corporation, ond ,ts officers or employees, may now have, 0' may later take, positions or trades In respect to any securities mentioned m th,s or any future Issue and such POSition may be different from any views now or hereafter e)'pressed 1M thiS or any other Issue Janney Montgomery Scott, Inc, which 15 registered With the SEC as an Investment adVisor, may give adVice to ,s mvestment adVISOry and othel customers Independently of any statements made 1M thiS or m any other luue Further mformatlon on any settmty mentioned herein IS available on request