Tabell’s Market Letter – July 05, 1974

——————————————————————————— TABELL'S MARKET LETTER 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK S1OCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE -;-;.; — ..,- -.–,;.- ….. –'–.-,.,– . . Jy,,,r114..,.. ——- This is the way the world ends Not wIth a bang but a whimper. T. S. Eliot, The Hollow Men Mr. Ellot's viSIon of the form of the apocalypse does not, in most times and most places, ex- tend to the stock market. Bear markets m the past have had a strong tendency to end WIth a very distinct and noticeable bang, the best example bemg the most recent one, WIth Its cllmax on May 26, 1970. It IS equally true that rather obvious selling climaxes were a feature of the endmgs of most other recent major bear markets, notably those of 1966, 1962 and 1957. It IS necessary to go all the way back to the early 1950's, and to certam occasions m the 1930's and 1940's, to find bear markets which have, m effect, qUIetly turned themselves around whlle no one was really paying attention. It is nonetheless worth explonng the possibilIty that the current downswing, whenever and wherever it comes to ItS ultimate end, wlll not be charactenzed by climactIC action visible in any other but the most esoteric technical terms. One argument m favor of such a contentlOn IS the general one that each market cycle has a tendency to be suffIciently different from the past one so as to fool the greatest pOSSIble number of people. Thus, the fact that the bear market of 1968-70 came to an end WIth one of the more classic, textbook instances of a selling climax to have occurred in recent years, suggests that its 1973-4 successor may well have a dIfferent sort of terminatlOn. An equally persuasIve argument IS the large number of observers who appear to .-be..;;.Locl0ng…LfQel1i!lgchmlL. If this.feeli!!9pecomes wIdespread, It becomes highly. likely that one of two thmgs ;;ill happen. either appa-rent-c1iffiactlcactlo'n';;;It take place 'i;here- upon the market will go lower (there IS, in technical history, plenty of precedent for this sort of thing), or, alternatively, the cllmax wlll never take place, and a turn WIll not be recogmzed un- tll the market has already moved substantIally off its low. It can also be persuasively argued that the market has already or shortly will have seen enough mdivldual bangs to have reached an effectlve sold-out bottom. ThlS week's collapse in Polaroid and Damon constituted really nothmg more than a long and dlstmgUlshed lme of in- dividual d,sasters runmng back through Combustion Engmeenng, Avon Products, the mortgage trusts, and Walt Disney all jffi W3y1oLevitz FurnIture. Eventually, the last of the Issues whIch supposedly-professlOnal portfolio managers have managed to mamtain at pnces mcredibly out of line with the rest of the market WIll have jomed the processlOn down the tube, and we can once again look for a market where It IS possible to practlce secunty analYSIS rather than readmg com- pound growth tables. It IS also just possible that that happy day may not be too far off. Now, none of the foregOing is meant to suggest, certamly, that a bottom has already occurred or that it may not occur at levels Significantly lower than the present. The December low on the Dow at the moment of thiS writmg has managed to hold, although the Dow gives the ImpresslOn of holdmg on by ItS fingernails in an attempt to keep from following the other major mdlces into the abyss. Our CumulatIVe Index, mCidentally, posted a milestone of sorts last week by break- ing through the 500 level a week ago to close on Wednesday at 475.16. ThIS figure represents a declme.of 51.from.the ..1973.hlgh and an astounding 68 from the high of 1465 posted m 1968. A market which has seen the average stock lose-twothld; of Its wlue over asix-yeaTjj'E;r,od'ls one that IS calculated to produce the sort of lethargiC bottom we have been discussing above. As we have pointed out m the past, the thmgs the stock market IS supposed to be worrying about have been awfully well publlClzed by th,s tIme and it is at least worthy of note that on Wed- nesday, after the stage had been set by the Fnday ,IS-point decline, the market shrugged off a 12 pnme rate WIth a ratherde;ultory ho-hum. The current bear market may, mdeed, wmd up With the usual climactic bang and make pinpomting a bottom easy for us, but ,at this stage ,we doubt if we would make climax-seehng an Important part of our mvestment game plan. Dow-Jones Industnals '1200 p.m.) 790.36 ANTHONYW. TABELL S & P Compo (200 p.m.) 83.72 DJLIIFIELD, HARVJY, TABELL Cumulative Index (7/3/74) 475.16 AWT/jb No stCltement or expression of opinion or Clny other moiler herein tonlalned IS, or IS to be deemed to be, directly or indirectly, on offer or Ihe SOIIC'loIIOn of on offer to buy or sell any 5ecunty referred to or mentioned The moiler ,s presented merely for Ihe conveflente of the ubscrlber While 'lie beheve the sources of our mformalion 10 be relioble, we In no way represenl or guorontee the accuracy thereof nor of the 5tolemenls mude herem Any act,on to be loken by the subSCriber should be based on hiS own Investlgotion Clnd informatIon Janney Montgomery Seoll, Inc, os 0 tarporat,on, ond ,/5 offIcers or employees, moy now have, or moy loler toke, positions or trades 1/1 respect 10 any secufltles mentioned ,n th,s or any future Issue, and such posillon mClY be dlfferen, from any views now or hereafler expressed In ,hiS or ony other ISSlJe JClnney Montgomery Stolt, Inc, whIch '5 registered WIth the SEC as on Investment odv,sor, may gIve adVice to ,Is Investment adVisory and othel customers mdependently of ony ,tatements mode ,n th,s or 111 any other ISsue Further mformO'lon on ony leamty menl,oned herem 1 ovo/lable on request