Tabell’s Market Letter – March 07, 1975

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – March 7, 1975 Market action continues satisfactory and, as we mentioned In this space a mSlnth ago, the likelihood of any-substantlaFcorrectlon'at this early stage of–the advance appears'relatlvelycremote.- There has7 how- ever, been some recent evidence of rotation of Individual stock leadership, and we are, therefore, com- mencing, this week, our occasional practice of a series of letters commenting on Individual industry groups and stocks In those groups. It should be noted that, as is always the case in these letters, comments are based solely on the technical action of Individual Issues and that further fundamental Information on any issue discussed is available on request. AEROSPACE. From a relatlve-strength point of view, this group had acted well through the third quarter of last year, generally moving down less than the market. Since that time, however, most stocks have failed to participate In the advance, and relative action has deteriorated. Potential base patterns remain im- pressive and upside breakouts, 22 In the cast of Boeing (20) and 31 In the case of General Dynamics (29) would Indicate higher levels. Outstanding action In the group Is being shown by United Aircraft (37) which has an upside target of 46 followed by possible higher levels. , AIRLINES. Another example of very sharp relative action reversal where one of the worst-acting groups in the late bear market has turned sharply upward, and was actually responsible for leading the Dow-Jones Transportation Average to a recent new high. Care should be exercised in new commitments, however, as in most cases heavy overhead supply now exists fairly close to current levels. Probably the most outstand- ing pattern is UAL Inc. (23). ALUMINUM. This group is typical of the cyclical issues which had resisted all but the last phase of the late bear market but which then broke downward and, by and large, failed to partiCipate in the recovery. However, by now, downside objectives have been reached, and the group has made substantial progress toward building new bases. We would hold current commitments although the existence of heavy overhead supply from the 1974 tops, In the case of Aluminum Company of America (39) at 42-48, for example, suggests — —that more-b,ising'maybe,r,iquired- – — – — – – — – -, – -. – — – -.- AUTOMOBILES. Long-term relative strength has, unsurprisingly, been poor during the worst automobile year in a long time. Nonetheless, the market appears to have discounted the current dismal fundamentals. Both Ford (36) and General Motors (41),have reached downside objectives and penetrated their long-term downtrend lines. However, technical patterns suggest that further baSing, around the mid-30's for Ford and around the low 40's for General Motors,is probably a necessity before ;lny meaningful upside move can be considered. AUTOMOBILE PARTS. Relative action has remained just about in line with the market for almost three years now. Such issues as Champion (ll), Dana Corp. (21) and Maremont (11) show evidence of having begun a basing process, but it is doubtful if that process is complete. The most Impressive technical pattern is that of Eaton Corp. (27) where ability to reach 32 would indicate considerably higher levels. BUILDING MATERIALS. Here Is a classic case of a market being willing to look ahead as relative strength of these Issues has been Improving since last fall despite the generally abysmal building picture. Those companies Identified with home improvement have the most outstanding technical patterns. Johns Manville (22), although it might decline short-term to Slightly under 20, would be an interesting purchase candidate on such weakness. Action of air conditioning companies has generally been desultory in recent markets. CHEMICALS. Here a wide diversity of indiVidual stock patterns presents itself. Union Carbide (54), despite its recent move to a seven-year high, suggests a longer term upside objective of 96. Industrial gas companies such as Air Products (60) and Chemetron (29) generally show impressive patterns. Dupont reacted well to Its recent dividend cut and seems to be forming a base although more work is probably needed. Allied Chemical (36) and Monsanto (54) on the other hand, while they may well move higher short-term, may encounter problems with overhead supply,at 40-50 fr the forer ad at 60-8 for the latter. CONTAINERS-METAL AND GLASS. American Can (34) and Contlrental Can (28), despite recent sharp moves, both have technical patterns that suggest higher levels. In the glass-container group Brockway Glass (16) has recently broken out of a two-year base with an upside objective of 24. COPPER. Recent relative strength in this group has been somewhat below average. Phelps Dodge (34) has shown interesting basing action recently and could well mount an attack on heavy overhead supply in the low 40's. Kennecott (36) is likely to continue to base in the low to mic!dle 30's but the present potentlalls substantial if an upside breakout can be achieved. Anaconda (17) is probably in the early'stages of a base formation in the 14-18 area. Dow-Jones Industrials (1200 p.m.) 764.78 S & P Compo (1200 p.m.) 83.97 Cumulative Index (3/6/75) 465.46 AWT/jb ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or expression of opinion or any other mottcr herein Contolned IS, or IS 10 be deemed to be, directly or mdlreclly, on offer or the 501,cltollon of on offer to buy Of sell any security referred o or menhoned The molter 15 presented merely for the converlenc of the subscber While 'i'Je believe the sources of our Informo han to be reliable, we 11\ no way epresenl or guarantee the accuracy thereof nor of the statements mude herein Any action to be token by the 5ubs.cnber should be based on his own Investigation and Information Janney Montgomery Scoll, Inc, as a corporaTion, and Its officers or employees, may now have, or may loter toke, POSitions or trades In respect to any seCUrities mentioned on thiS or any future Issue, and such posilion may be different from any Views now or hereafter epressed In thiS or any other luue Janney Montgomery Scott, Inc, which IS registered with the SEC as on Investment adVisor, may give adVice to Its investment adVisory ond olhel customers Independently of any statements mode In tha or In any other Issue Further Information on any seevflty mentioned herein IS available on request o