Viewing Month: September 1974

Tabell’s Market Letter – September 06, 1974

Tabell’s Market Letter – September 06, 1974

Tabell's Market Letter - September 06, 1974
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p– TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VORk STOCk eXCHANGe, INC MEMBER AMERICAN STOCK EXCHANGE – September 6, 1974 '— . -, Herewith a'warning7'-This -l-etter 'isgotng'to'bealmose'exclu-si velyconc-erned' witlffigures ; Tiles e – .., who are turned off by numbers, therefore, need read no further. The warning also applies to those whose attitude is, Don't confuse me with facts; my mind is made up, and there are, unfortunately, a few investors in this category, investors who prefer the construction of elaborate economic scenarios of gloom and doom to painstaking study of the realities of the marketplace. With this caveat out of the way, we continue. In precipitously plunging markets, such as those in the last few weeks, the first task of the technician is to determine whether the preconditions for reversal In fact exist. We have, fortunately, numberous benchmarks to guide us. Painful as they are, down markets are nothing new. There are plentiful examples from the past, and they can be studied and measured. One Simple and obViOUS measurement of the severity of a decline is the rate at which various moving averages are dropping. For example, as of last Wednesday, a ISO-day moving average of the Dow was declining at a rate of .17 per day. This rate of decline, Interestingly enough, has been equaled or exceeded only on three occasions in 28 years of market history, June, 1962, August, 1966 and May, 1970. All three, in- vestors will recall, constituted major bottoms. On a shorter term basis, a 25-day moving average, as of Wednesday, was moving down at the rate of .64 daily. This is the approximate figure reached a few days prior to the bottom in 1970 and also on one occaSion In June of 1962. In 1966 the down- swing never attained the short-term rate of decline that the present one has shown. Still another measurement of whether a decline is reaching historical maximum severity is the ratio of the Dow to its own moving averages of various lengths. The ratio of the D1A to its own 25-day moving average, for. example, has been below 0.9 on four,occasions ,over the ,past few-,-eks. Her,, — – – ——'— . – – – – , – – – ————- .–.-,– —–'. again, we have a level attained on only three occasions in 28 years — September, 1946, May, 1962 and May, 1970, all recognized by hindsight to have constituted major bottoms. A third measurement of whether a market is sufficiently oversold so that a major bottom may be considered in prospect is market breadth. The ten-day advance-decline oscillator, consisting Simply of a cumulative total of advances minus declines for the past ten days, is a widely-used tool and appears in many stock market publications. The raw figure IS useless for comparison over long periods of time, but such comparisons may be made by running a ten-day total of the ratio of the net differ- ence to totallssues traded. That figure moved down to a level of -3.18 last week. This level has been attained on 14 separate occasions in the past, each one fairly close to a bottom of either Inter- mediate term or major proportions. There are a few cautions to be derived from a study of this figure, however. There is ample past precedent for its moving lower than its current level and, therefore, based on this indicator, another short-term down leg cannot be ruled out. Such a down leg, however, would move the ratio to a level which has characterized major bottoms in the past. We could bore the reader with more numbers. We maintain and study at least a dozen other simi- lar series, the purpose of which is to measure the severity of a decline against historical bench- marks. They all pOint, however, to the inevitable conclusion that the recent decline has been sharp enough to set up the preconditions for a major reversal. We emphasize our use of the word preconditions. At the moment the stage is only set, and the actors have yet to make their appearance. Once the preconditions are met, first-stage upside rever- sal evidence must present itself. Such evidence is often provided at an early stage by breadth and volume. Here, again;-we return-to numbers .One general characteristic-of,true market reversals in the past has been the occurrence of days on which 80 or more of all issues traded advanced or when volume expanded to 150 of its own 25-day moving average. In these terms, Thursday's 22-point rally in the Dow must be termed disappointing. A bare 55 of all traded issues moved upwards, and volume was just barely above its average for the pnor 25 days. No series that we maintaIn, it must be admitted, has shown convincing evidence of true reversal momentum. Now the above, like most statistical presentations, has been dry as dust, but we make no apolo- gies therefor. Obviously in times like the present it is easy to become prey to emotion and be haunted by the spectres of unreality. It is at just such times that It is helpful to return to the harsh, cold reality of numbers. Dow-Jones Industrials (1200 p.m.) 675.77 S & P Compo (1200 p.m.) 71.46 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (9/5/74) 391.52 AWT/jb No statement or expression of opinIon or ony other moiler herem contolned IS, or IS to be deemed to be, directly or indirectly, on oHer or the OIICllollon of on offer to buy or sell any security referred 10 or mentioned The moiler 15 presented merely for the conver'lence of the subCrlber While we believe the sources of our Informo hon to be relioble, we In no way represent or guarantee the accuracy thereof nor of the sto;ements m)de herein Any OelIOn- to be token by the subSCriber should be bosed on hiS own investigation and Information Janney Montgomery Scott, Inc, as a corporation, and ,ts officers or employee may now hove, or may laler toke, positions or trades In respect to any securities mentioned In thiS or any future Issue, and such position may be different from ony views now or hereafter eypressed In thiS or any other Issue Janney Montgomery Scali, Inc, which IS registered With the SEC as on Investment adVisor, moy give adVICe to ItS Investment adVisory and othel cvstomers Independently of any stotemenll mode In thiS or In any other ISsue Further information on any security mentioned herein IS oVOllable on request

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Tabell’s Market Letter – September 13, 1974

Tabell’s Market Letter – September 13, 1974

Tabell's Market Letter - September 13, 1974
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. – – – I–'– TABELL'S MARKET LETTER t, t –,- – –'I …… – 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMSER New YORI( STOCK EXCHANQE. INC MEMBER AMERICAN STOCK EXCHANGE September 13,1974 The precipitous plunge of the stock market to new lows has awakened money managers, how– -,everbelatedly ,-tQ-afatherelementaryfact -that ,peiodica-lly.s eemsAo, get.focgotten,-.-,-the fact that, by their very nature, stocks carry a high degree of risk, at least over the intermediate term. Yet, declining stock markets or not, capital exists and is required to be invested somewhere. Thus the investment world has been looking assiduously, in recent years, at other forms of investment. Some of these have been entirely outside the area of securities markets, such as real estate and precious metals. The problem, of course, is that even these markets are beginning to devel- op some of the symptoms with which those of us who have watched the stock market for many years are familiar. That risk attaches to real estate is a sad fact that a good many real estate investment trusts are beginning to discover, and ,if the recent behavior of gold stocks is any harbinger, those who have been assiduously socking away gold coins may shortly come to the same awakening. Closer to the securities field, there was a rash of interest about a year ago, in long-term bond funds as a potential public investment medium. It then became apparent that interest rates, even when high, can go still higher and bond prices, though low, still lower. There have been fewer recent long-term bond fund offerings. At the moment, short-term money market instruments are enjoying a deserved popularity, since current money-market conditions, where II-plus per cent yields can be obtained with almost ab- solute safety, are a rarity in financial history. All in all, there appears to be very little doubt that the existence of the alternative investment media mentioned above constitute at least a par- tia l-ex-plana-t-ion-of-the-eurrent-depres's-ecllevehof-stockpriees – – ' ' -, – – – , . . – — ., – – Yet problems remain. The current level of short-term mterest rates is hardly likely to be per- manent and, while pleasant to have around at the moment, is unlikely to be an answer to the problems of long-term investment. Long-term bonds Perhaps. We are, let us recall, in a period when every American, from the White House on down, appears agreed that the major prob- lem facing the country is inflation. We have studied in detail in this letter in the past the effect of inflation on long-term bond prices. Without going through the mathematIcs once more, it can be noted that the effective real dollar return to the investor after taxes on a 10, 20-year bond is less than 1, assuming a 6 rate of inflation which is a bit more than one-half of the current rate. There was a conventional wisdom that existed many years ago which hypothesized that Common stocks were the single medium that constituted an effective inflation hedge. Wall Street has spent the last 20 years effectively laying that myth to rest. The lesson that hyper-inflationary periods in the past have had a depressing effect on corporate earnings and hence, indirectly, on stock prices, has by now been well learned. However, in any economy the rules of the game change continually, and the rule changes can result in yesterday's myths becoming today's reality. We suggested in this space earlier this year that we were undergoing, in 1973-74, the first postwar experience in which the rise in corporate profits exceeded the inflation rate. It is a simple fact that,in our view,few analysts have given much attention. The market, certainly, is ignoring it completely. For the 12 months ended June 30,the DJIA -earned 93. 26;and it'ls'now-selling'for exactly the same'multiple'it'sold at the nadliof inVestor confidence in 1949. Current profits are a fact. The market's skepticism about future profits is clear. It must also be admitted that stock income has not in the recent experience kept pace with inflation. The current dividend paid on the Dow of around 38 reduces to 22.74 in 1958 dollars, less than the 27.95 return that the investor in the Dow received in 1958. The record on fixed income securities, however, is a great deal more dismal. All this simply underscores the insidiousness of inflation, an unpleasant fact the American public is finally beginning to realize. And yet lf, over the long term, capital is to be protected from the ravages of inflation, it may well be that equities will, in fact, provide a vlable vehicle. Dow-Jones Industrials (1200 p.m.) 634.86 ANTHONYW. TABELL S & P Compo (1200 p.m.) 65.91 DELAFIELD, HARVEY, TAB ELL Cumulative Index (9/12/74) 370.42 AWT/jb No statement or expression of oplnton or (Iny other matter herein onlolned I or 15 10 be deemed 10 be, directly or indirectly, on offer or the solicitation of on offer 10 buy or sell ony security referred 10 or menlloned The motter IS presented merely for Ihe converlena of the subscriber While we believe Ihe sources of our information to be reliable, we In no way represent or guarantee Ihe accuracy thereof nor of the stotements mude herein Any actIOn to be taen by Ihe subscriber should be based on hiS own Investlgollon and Information Janney Montgomery Scott, Inc, as a corporalton, and Its offlcer or employees, may now have, or may later toke, poslhons or trades In respect to ony securities mentioned In this or any future Issue, and such posl\ion may be different from ony views now or hereafter expressed In this or ony other Issue Janney Montgomery 5col1, Inc, which IS registered wllh Ine SEC as on Inveslmenl advl5ar, may give adVICe to .ts Investment adVISOry and othel customers Independently of any statements mode In thiS or ' any olher luue Further infOrmation on ony secur,ly mentioned herem IS ovallable on request

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Tabell’s Market Letter – September 20, 1974

Tabell’s Market Letter – September 20, 1974

Tabell's Market Letter - September 20, 1974
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————– ————————————– —-, TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DtVISION OF MEMBER NEW VORl( STOCI( eXCHANGE, INC 'EMBER AMERICAN STOCI( E)cCHANGE September 20, 1974 If it did nothing else last week, the stock market at least provided us benumbed tape watchers opportunitytoo watchit-do .s-omething–other-thansink,like, a.stone .-It did ,.,-m,fact ,stage' an upside performance of moderately impressive proportions. Early weakness in the first hour of Mon- day's trading was soon erased,and the day ended with a 12 1/2 point advance. That rally continued through Tuesday afternoon before some of the gains were given up,but a 9 point rise on the day was still recorded. In Wednesday's trading the market remained lower most of the day, but a late- afternoon advance pulled it ahead to a 3-point gain, and finally, Thursday's action produced a sus- tained 22-point rally on 17-milliol1-hare volume. Thus a temporary respite, at least, from one of the most vicious short-term declines on record. Historically, we have been accustomed to set a 20 decline as the test of whether a downswing constitutes a major bear market. In just 35 trading days from its fuly 24 close of 805.77, the Dow dropped 178 pOints to 627.19 on September 13, an almost 22 dip. In four trading days since then a 46-point rise has retraced a quarter of the drop. The question is, of course, does all of this represent the denouement of the painful process we have been undergoing over the past year We discussed this question two weeks ago, even be- fore the market had completed its final plunge to a closing low of 627.19 of September 13. We noted at that time that the velocity of the decline to date had provided the preconditions for a re- versal, but we said, At the moment the stage is only set, and the actors have yet to make their appearance. The stage is still bare, albeit, perhaps, with a bit of rustling in the wings . Technical analysis, it seems to us, must always consist of a combination of hard statistical fact and a certain amount of intuition. There are those, unfortunately, who practice the latter al- 'W,'-1-rrlO!; teJ0-ltls';ve l-yand4hey-ha ve -oHenrju st-l-y-;-we -thl-i-nk.,-beE!ncI'i-Heized,,,,,- cl onc)t-o,,o,,e'ver ,,,,,,,,…,.I-, think a certain dose of intuitive reasoning can be ruled out of the process entirely. As far as statistical fact is concerned, there is, unfortunately, little comfort to be gained from last week's performance. Impressive as it was, the rally did not meet the standards of breadth and volume which have been set by most major reversals of previous market history. The cold- hearted statistician, therefore, can state, and quite correctly, that there is, based on this evi- dence, a high degree of probability that last week's rally dId not Signalize a major low. The trouble with the pure statistical approach is that it stops right there. We said above that the rally did not meet the standards set by most major bottoms in the past. 'There have been ex- ceptions. Where an intuitive approach is required is in determining whether it is more likely than normal that September, 1974, will constitute one of the exceptions. One major cause for optimism lies in the fact that, at the lows of a week ago, large numbers of downside objectives, many of which had seemed implausible to us as the related distributional tops were being formed at the beginning of this year, were, in fact, being reached. The Dow, for example, had a downside target of 620, reached at Monday's intraday low. More interestingly, a number of market leaders, names of the caliber of IBM, Eastman Kodak, Sears Roebuck, etc., were, last week, fulfilling the downside counts of their major distributional tops. With almost everything else in the marketplace having been thoroughly sold out long before the first-tier stocks underwent their blood bath of the past few months, it is possible to argue that the market may have run out of downside leadership. Yet all this -is;'as we said, intuitive. -Little reversalevidence has'been provided In four short — days of market action, although it may well be forthcoming In the future. The market's technical position at the moment, however, is unlike that of, say, May, 1970. At that time we said in this space, three days after the low, We think, in sum, the effechve bottom has been reached. We quote this, not to suggest that we happened to be right on a particular occasion, but to illustrate that 1970 was a market bottom where all of the numbers fell neatly into place, and it was possible to suggest a high probability of reversal. This is not happening in September, 1974, and It would, therefore, be well to treat it more gingerly. Dow-fones Industrials (1200 p.m.) 664.89 S & P Compo (1200 p.m.) 69.27 ANTHONYW. TAB ELL Cumulative Index (9/19/74) 381.16 DELAFIELD, HARVEY, TAB ELL AWT/jb Note Comments on all issues based solely on techmcal factors. Further informa- hon available on request. No stalement or e)(pr&SSlon of opinion or ony other matter herein contained IS, or IS 10 be deemed 10 be, directly or Indirectly, on offer or the sol,cltotlon of on offer to buy or sell ony security referred 10 or menhoned The motter IS presented merely for the converumce of the subscriber While -Ne believe the sources of OUf Informo- tlon '0 be ,el,oble, we In no way represent Of guorontee Ihe accuracy thereof nor of the Maternenls mude herem A.ny ocllon 10 be token by Ihe subSCriber should be bosed on hiS own Investlgot,on ond information Janney Montgomery SCali, Inc, as 0 corporation, ond I officers or employees, may now have, or may later lake, POSitiOns or trodes In repecl loony securities mentioned In th,s or ony future Issue, and such pOSition dlffcrent from Clny views now or hereafter eypressed If! thiS or ony other Issue Janney Montgomery Scoll, Inc, which IS registered wllh Ihe SEC os on may give advl;e to liS Investment adVisory and othel customers mdependently of any statements mode In thiS or In ony other Issue further mformollon on mentioned herem IS available on requet

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Tabell’s Market Letter – September 27, 1974

Tabell’s Market Letter – September 27, 1974

Tabell's Market Letter - September 27, 1974
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, , c , , , , i I I ( TABELL'S MARKET LETTER . . . jc c 909 STATE ROAD. PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VOAK STOCK EXCHANGe, tNC MEMBER AMERICAN STOCK EXCHANGE no du ' September 27, 1974 ' 'azd eou Itory mark ,et–''''''-''''''''''''''''…….,..,..,.,.,,,,,,,,-…,.,,,,…–,…,…………-,……'Ii .,.,.. On the Prime Rate — Last week's market action can be likened — if one can visuallze the sce- nario — to one of the old Western movies where, as the wagon train 1S surrounded by Indians, the cavalry, flags flying and bugles blowing, suddenly appears at the pass — and then gallops headlong over the nearest cliff. We had been assured for some months that the prime interest rate was the key to the stock market and that the one thing really needed to turn the market around was a lower prime rate. On Wednesday we got one, and it turned the market around for something like three hours. In a wild frenzy, with a late tape, buyers turned a sharp selloff into a 13-point rally, which phenomenon petered out by noontime with the major averages actually winding up down on the day. The whole thing reinforces our content at being employed in technical work and thus not being forced to explain the market in terms of current news events. The unfortunates who have been devoting reams of type to exC plaining every recent market change in the light of interest rates will now, sad to say, have to return to their drawing boards and find another convenient simple-minded explanation for why the market is behaving as it is. On the Economic Summit Conference — Since we consider ourselves, at least parenthetically, economists, we find it difficult to work up a high degree of optimism as to what the forthcoming conference will, per se, achieve. In our experience, the easiest way to get three conflicting opinions is to force two economists into an argument. The thought of fifty or so of these gentlemen coming up with a coherent prescription for curing inflation boggles the mind. And yet, just as the English were famed for muddling through, we could, by happy accident, come out of the conference with something which '…..,….'c.1..,..m1.1(aghcmt work .W..e.ha'ee,,en.heen.tr.a ted.in.th e summiLprev'ie.wto Drs.,M ilton ,Fdedmanand.John Kenneth Galbraith agreeing on the need for restrictive fiscal policy. Now, anybody who has read even one chapter by either of these gentlemen must be aware that they reached this agreement from philosophical positions that differed by 180 degrees, The whole thing suggests, though, that an officious consensus policy is at least possible. What is absolutely guaranteed is that the formulators of that pollcy will not agree afterward a s to just why it did or did not work. On the Roids on the Cabuie — No, we were certainly not bright enough to coin that phrase. It was coined by a clever and humorour observer of the financial scene, Martin Sosnoff, in a recent Forbes magazine article. For the uninitiated, what are being referred to are the Polaroid options traded on the Chicago Board Options Exchange, and that exchange is apparently following the ancient and, to us, endearing, securities-industry custom of coining its own particular argot. Which brings us to the fact that options volume on the Chicago Board reached 44,140 contracts on Wednesday, a new record by about 10. This, incidentally, represents contracts for 4,414,000 shares of stock which was approximately one-quarter of the number of shares traded on the NYSE on the same day, despite the fact the options trading at the moment is restricted to 32 issues, or slightly under 2 of the total number of issues listed on the NYSE. We are duly informed by conventional wisdom that the publlc has left the market and that there is no further interest 10 speculation. To paraphrase Butch Cassidy and the Sundance Kid, Who those guys out there in Chicago On Odd Lotters — Another class of investors, one that can be shown statistically to have been – leaving the market in droves for four years, appears to be showil)H a minor renaissane.With a single – exception-;- therechad beer(ilci day since i970 until recently 'when the odd lot trader was a net purchaser of common stock. Yet it happened a couple of times in January of this year, and the phenomenon has been repeated no less than five times in recent weeks. This odd-lot buying, moreover, has been con- trasted with strong evidence of institutional seillng on the same days. It is an article of faith, and one borne out by historical experience, that this should be bearish. And yet, we wonder. It was the odd lotter who was a heavy net seller in all those years when astute professionals were rushing out to buy first-tier growth stocks at two to ten times their current prices. It was the odd lotter who was a net seller in a market that we now know, by hindsight, to have been one of the most difficult ones in which to achieve an above-average return since the 1930's. Could it be that the poor, innocent is smarter than we give him credit for being Dow-Jones Industrials (1200 p.m.) 631.49 ANTHONY W. TABELL S & P Compo (1200 p.m.) 65.87 DELAFIELD, HARVEY, TABELL Cumulative Index (9/26/74) 371.47 AWT/jb I NQ stotemenl or expreulon of opinion or any other matter herein contained 15, or IS 10 be deemed to be, directly or IndHectly, on offer Of the soliCitation of on offer to buy or sell ony security referred 10 or mentioned The moiler IS presented merely for Ihe convellence of Ihe subScriber While 'He belteve the sources of our tnformo tlon to be reliable, we In no way represent or guarantee Ihe accuracy thereof nor of Ihe stolements mude herein Any oellon to be token by the subscriber should be bosed on hiS own investigation ond Informotlon Jonney Montgomery Scott, Inc, os a corporotlon, and Its officers or employees, may now hove, or moy later toke, posItions or trades In respect to any securilles mentioned In thiS or any future Issue, and such position may be different from any views now or hereafter e)pressed In L. t,h,nomor'anmydo'theOrd'IsOsueYOfJaOnOnYey''MOonmtg.om,e'rmyoSdc.omll,'hIn,;,,ow'hmuohoy.sor'ehg.i'stier,e,d.WFithhth.e'SmEfCoo'smoo'n,oInovoesotmoeonyt,ad.V'isotr, ymma.y,gi'voeoa'ddVh.ic,.e.too,,ItsovInovesotmbe',ntoood,v,lqsor.y,o,nd othe. . 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