Tabell’s Market Letter – January 18, 1974

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON NEW JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCK EXCHANGE. INC MEMBER AMERICAN STOCK EXCHANGE January 18, 1974 As twenty years of experience has made us painfully aware, forecasting the stock market is a hardgus hu.stness. Qcsionally );he..taskJs madedo.ubly difficult. Thereare often.timesLwhen ,in …., addition to figuring out where the market is going, it is necessary to devote fairly intensive scrutiny to find out where it has been. The last six months or so constitute a perfect example of a period for which Just such is the case. Date DnA Chg. S & P 500 Chg. Cum. Index Chg. 8-22-13 10-26-73 12- 5-73 1- 3-7' 1-10-74 1-\7-74 851. 90 987.06 15.9 788.31 -20.1 880.69 11. 7 823.11 – 6.5 872.16 6.0 100.53 116.38 92.16 99.80 92.39 97.30 15.8 – 20.8 8.3 – 7.' 5.3 652.19 749.77 561. 90 614.62 585.90 610.11 15.0 -25.1 – 9.' 4.7 4.1 HIgh made January 7. 1974 The table above shows the levels of three averages, the Dow-Jones Industrials, S -& P 500 and our own Cumulative Index, which it will be recalled, is an unweighted index of all stocks on the New York Stock Exchange, at six significant benchmark dates during the past half-ear. The first of these dates is August 22, 1973, which was the starting date of the market advance that preceded the recognition of the energy crisis. As can be seen, for the period beginning on August 22 and ending October 26, all three indices posted identical 15 advances. The sharp decline which then ensued to the lows of early December chopped some 20 off both of the widely-followed averages and constituted the sharpest drop for such a short period in recent stock market history. The fall taken by the average stock, as shown by the pumulative Index, was even worse, that index losing, over the six-week period, more than one–juaner of its-value.oc W-e then had theunusually strong year-end rally whIGh-peakedout.on,January.3 , 1974, and at this pOint an interesting fact began to manifest itself. The Dow advanced on that rally considerably more than did the S & P 500, moving up 11. 7 vs. an 8.3 advance in the more comprehensive index. Interestingly, for that period the Cumulative Index also outperformed the S & P, posting a9.4 advance and extending its rally to January 7, two days beyond the peak in the other averages. On the decline to January 10, the Cumulative Index was the star performer, declining far less than the Dow or the S & P which again turned in the worst performance. For the rally through yesterday the S & P again posted a relatively Inferior advance. To / From 8-22-73 10-26-73 12-5-73 1-3-74 1-10-74 Change Dr sp Cum DJ SP Cun DJ SP Cum Dr SP Cum Dr SP Cum 10-26-73 12- 5-73 1- 3-74 1-10-74 1-17-74 15.9 15.8 15.0 – 7.5 – 8.3 -13.8 -20.1 -20.8 -25.1 3.4 – 0.7 – 5.7 -10.7 -14.2 -18.0 11.7 8.3 3.4 – 8.0 -10.1-16.6 -20.6 -21.8 4.4 0.2 2.3 – 3.2 – 6.5 -U.6 -16.4 -18.6 10.6 5.6 9.4 4.3 .8.6 – 6.5 – 7.4 – 4.7 – – 1.0 – 2.5 – 0.7 6.0 5.3 II I 4.1 The table above shows the percentage change in each of the three indices for all of the benchmark dates mentioned above to each subsequent benchmark date, the starting date being shown acros s the column headings and the end date down the rows. As the first set of columns shows quite clearly, the investor in stocks In the Dow has tended to outperform other Investors since last October. At the December low he had posted only a 7 1/2 loss of his capital since August, and, as of early January and today, he is actually ahead of where he was at the August lows, while the other Indices still show losses. Since December as the right-hand 'figures show, the Cumulative Indexhas turned in an improving'relative-e– performance. It Is now 8.6 above its December lows and Is the closest of the three indices to posting a new high for 1974. All of the above number crunching is, we will be first to admit, nothing more than past history, but we do think it offers a number of clues to the market's current state. As we have suggested in the past, we think the relatively poor performance of the S & P 500 is no accident and is attributable to the relatively heavy weight in this index of the high p/e,growth issues with their continuing vulnerable technical patterns. To us, perhaps the most significant fact is the recent improvement in the action of the Cumulative Index. This suggests a somewhat firmer undertone in the market than the other averages have perhaps so far indicated. Such action, it seems to us, if continued, could only be interpreted con- structively. Dow-Jones Industrials (1200 p.m.) 860.85 ANTHONYW. TABELL S & P Compo (1200 p. m.) 96.17 DELAFIELD, HARVEY, TABELL Cumulative Index (1/17/74) 610.113 AWT/Jb No Slalement or expression of opinion or any olher matter herein contOlned IS, or IS 10 be deemed to be, dlrec1ly or Indirectly, on offer or the Sollcllotlon of on offer to buy or self any security referred to or men1ioned The motter IS presented merely for the conver!enc of the subSCriber Whde oNe believe the sources of our information to be reliable, we in no way represent or guarantee the accuracy thereof nor of the statements mude herein Any action to be taen by the subSCriber should be based on hiS own Investigation and Information Jannev Montgomery Scott, inc, as a corporation, and Its officers or employees, may now have, or may later toe, poSitions or trades In respect to any securities mentioned In thiS or any hlture ISsue, a'1d suc pmltlO'1 moy be ddferent from any views now or hereafter eyp'essed In thiS or ony ather Issue Janney Montgomery Scott, Inc, whJCh IS registered With the SEC as on Investment adVisor, may give adVice 10 Its Investment adVISOry and Olhel customers Independently of any statements made In thiS or In any other Issue Further information on any security mentioned herein IS ovallable on request