Tabell’s Market Letter – October 18, 1974

r..— — —–'- – -…….. TABELL'S MARKET LETTER – 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE. INC. MEMBER AMERICAN STOCK EXCHANGE -1-…..'…-.-T-n-e,-s.to-c-k''7m'a-,rk.e.t,.',p,i,c.t.u..re.conti,n,u..e.d..,t-o,–u..m..c.i,l.a-th i s -w eek .wS2ffchto-abne-ra1st8o,n 197,;.4,,,isfiing aild ( as-w il l be dl S – ' – cussed below) unprecedented rapidity. We suggested in last week's letter that the action of the Dow as it approached the 650-680 area would help to provide a clue as to future market action. We indicated that the most bullish possible course of action would be for the average to fluctuate back and forth in that trading range for some period of time and eventually penetrate it on the upside, thus completing the familiar head-and-shoulders type basing action. Last week's trading saw no fewer than four distinct and separate moves across that range. Monday's continuation of last week's rally brought the index to an hourly high above the 680 level, and a decline starting Monday afternoon and continuing Tuesday morning carried to the mid660' s. An intraday rally on Tuesday brought the average up again, before a drop on Tuesday afternoon and Wednesday carried it down to a 642.29 Wednesday close, moderately below the range we had suggested. The strength on Thursday and Friday morning, however, brought the average back into the projected trading range. As we indicated last week, continued ability to hold within this area would suggest that the base formation for an advance may be completed around current levels rather than involving a test and possible penetration of the lows of two weeks ago. / Returning again to our letter of last week, we made an attempt to be somewhat blase about the sharp advance of a week ago suggesting that it was no more than one of many examples of an over- sold stock market probing for a bottom. This, of course, is at least partially true Since, in genera-lTma eket -Gha ra Gter-i s tic sha-verema,in edu ncha ng ed.for.centurie s….,.xet,c los erexa mina tionrev-ea Is that, in some aspects, we were present, during the week of October 7-11, at an event of historical proportions. The percentage advance on the Dow for that week was just under 12.6, and there has been no percentage rally of that magnitude in any given trading week since 1938. Prior to that it is necessary to go back to the 1929-32 period to find weekly advances of greater percentage. There were three on the way down during 1929-32 and eight after the market had turned in 1932-33. Markets in the postwar period had never been able to achieve a weekly advance of better than 6 1/2 until this week. Actually, the total length of the rally was six days, and, over the six-day period ending Monday, the Dow posted a 15.2 advance. Again, this advance has been exceeded over a sixday period on only nine prior occasions Since 1926, eight of them in the 1929-32 period and one in 1938. We have suggested in the past that it is necessary to return to the 1930's to find a benchmark with which to compare the current decline. It is apparently also necessary to return to that area to find a comparison for the market's current volatility. Nor is the action of a week ago the only instance in the recent past of unusually wide market fluctuations. The decline from the January, 1973 high was punctuated by two rallies, one of 16 in August-October, 1973, lasting 46 days, and a 67-day advance of 13 in December, 1973-March, 1974. Rallies of this magnitude within an ongoing bear market are essentially unprecedented by postwar standards. We are not sure what value the above statistics possess for forecasting purposes, but they – raise some rather interesting questions about the nature of the current stock market. Essentially, they constitute another link in a long chain of evidence which suggests that the equity market has become more volatile,both on the upside and the downside,than has been the case at any time with- in the experience of most investors. If this is indeed the case, flexibility in investment manage- ment, including ability to move rapidly as conditions change, will be at a premium. It is interest- ing to speculate as to the extent to which such flexibility indeed exists in a market coming to be dominated by larger and larger investment-decision makers. Dow-Jones Industrials (1200 p.m.) 657.62 ANTHONY W. TABELL S & P Compo 11200 p.m.) 72.13 DELAFIELD, HARVEY, TABELL Cumulative Index (10/17/74) 393.06 AWT/jb No stctemenl or expreSSion of opinion or any other maIler herein Contolned IS, or IS to be deemed to be. directly or Indirectly, On offer or the SOI'Cllotlon of on offer to buy or sell ony security referred 10 or mentioned The mottC!f Is presented merely for the corwerlence of the subscriber While Ne believe the sources of our 1Oforma han to be reliable, we 10 no way represent or guarantee the accuracy thereof nor of the statements mude herem Any (lctlon to be taen by Ihe subSCriber should be based on hiS own 1Ovestlgohon and InformallOn Janney Montgomery Stott, Inc, as a corporation, and lIs officers or employees, may now have, or moy later toke, poSitions or trades In respect to any securlhe mentioned In th' or any future Issue, and such pOSition may be different from ony views now or hereofter expressed In thiS Of any other Issue Jonney Montgomery Scott, Inc, which IS regiStered With the SEC as on Investment odvlsor, may give adVice to Its Investment adVisory and other rus/omers Independently of any stotements mode In Ih,s or In ony other Issue further 1Oformol!on on any security mentioned herein IS ovodoble on request