Tabell’s Market Letter – April 04, 1975

Tabell’s Market Letter – April 04, 1975

Tabell's Market Letter - April 04, 1975
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCI( EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE I April 4, 1975 J maybecalledthe.fir.st,The,m,Ir(eLhas beenuncjergning, .IJ).thepasttw.ow.eeks ,whaJ .significant respite in the almost unprecedentedly sharp advnce which began on De;;emb; 6' f last yer t 57'7.60– on the Dow and which carried 36.2 to 786.53 on March 17, a penod of 68 trading days. Over a five- day period ending on March 24, the Dow lost some 43 pOints for a 5 1/2 correctIOn before rallying sharply on Tuesday and Wednesday a week ago to reach a closing high of 778.26. Since that time, the averages have again declined, with some wide intraday fluctuations, and ,as of this writing, are testing last week's lows. This strikes us as perfectly normal action since, at the lows of two weeks ago, most market indices, the Transportation and Utility averages as well as the Industrials, had reached the down- side objectives of the small tops that had been formed. Thus, a period of fluctuatIOn will be necessary in order to build a ba se for a new leg of the advance. As was predictable, with the unpleasant memories of 1973-74 so fresh in our minds, the first SIgn of any downside activIty brought forth the usual rash of predictions that the bull market was over or that, indeed, it had not been a bull market at all, but only an interruption in the plunge into the abyss which purveyors of the apocalypse had assured us was commg. ,This latter sort of reasoning seems to us to be particularly specious. Even if St. Patnck's Day, 1975, proves to have been the high point of the advance 'which, in our view, IS highly unlikely), it requires an act of supreme semantic contortion not to call a 36 advance a bull market. Those forecasters who have been conSistently calling for lower levels and those mvestors who spent the first quarter of 1975 sitting on large piles of cash have, quite frankly, missed the boat and can best start off by admitting the fact. The real question, of course, is just what is the technical SIgnificance of the downswing. As we have pOinted out in this space in the past, the tendency of bull markets in the postwar period has been – t o goa—-grea t- deaI-lon;Jer–than-68trad.ing da-ysilief0rethef.irs t;5-correGtion-ensuedW ethmLthefa ct…..- . – that one has taken place this early IS just another demonstration of the fact that markets of late have taken on a great deal more volatility, a volatllity in many ways more characteristic of the 1930's than of the pos twar period. The downswing from January 11, 1973, through October, 1974, for exa mple, had no fewer than 23 swings of 5 or more. It is highly possible that its upside aftermath will demonstrate a like volatility. It should be noted, ,oreover, that in no bull market since the 1920's has the first 5 correction denoted the end of the upswing. It has most often denoted a loss of momentum and meant that the rate of advance compared With that of the initial rally was becoming relatively more slow. This IS, we thmk, the case m the present instance. We have been usmg for some time a projected upside target of 850 for the Dow and have been unwilling, by and large, to look beyond this. The 850 figure is arrived at in two ways. It is, first of all, the most plausible upside obJectlVe for the base formed in the October-December period, and it is confirmed by the bases formed on other averages be- side the Dow, almost all of which suggest a move of like magnitude. Secondly, 850 constitutes an area of Significant overhead supply. For a period starting with the last two weeks of November in 1973 and continumg through the end of June, 1974, the Dow spent most of ItS time trading in a range between, roughly, 825 and 875, With only occasional downthrusts below this area, to around the 790 level. It did this, moreover, on fairly heavy volume, especially in the early part of the period. It has long been our contention that the market's behavior when this supply was reached would be the major determmant of its future action. We are now reaching the pomt where such a test is taking place, t he Dow havmg backed off two weeks ago from the very lowest part of this supply. Moreover, a great many mdivldual stocks, which have outperformed the averages, are now reaching the price levels at which they traded in the early part of 1974 before the final phase of the bear market-break'. In a great many cases; these mdivldual- issues, predictably enough, have begun to back and fill as they reach their individual supply areas. Our own feeling, then, IS that the most likely market scenario is more or less as follows. We would expect the advance m the averages to continue, in fits and starts, and with wider swings back and forth, to around the 850 level. We would expect that that level will prOVide suffiCient resistance to restrain the market on the upside for probably the remainder of 1975. If individual stocks in significant numbers beglr to move through their 1974 supply levels, It would be bullish, mdeed, and possible to project a highly constructive market climate for 1976 and beyond. If the overhead supply turns out to produce Significant distribution, however, a reassessment of the outlook at that point would then be warranted. Dow-Jones Industrials (1200 p.m.) 749.92 S & P Compo (1200 p.m.) 81.26 Cum'cllative Index 4/3/75 466.06 AWT/jb ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or expression of Op'nlQn or any other motter herein contolned IS, Or IS 10 be deemed to be, directly or indirectly, on offer or the soliCltotlon of an offer to bvy or sell ony security referred 10 or mentioned The molter IS presented merely for the (onverlence of the subscriber While we believe the sources of our nformo tlon to be relloble, we In no way represent or guorontee the accuracy thereof nOf of the Uotements mude herein. Any aCllon 10 be token by the subscriber should be based on hiS own investigation and information Janney Montgomery Scott, Inc, as a corporotlon, and Its officers or employees, may now have, or moy loter toke, positions or trades In respect to any securities mentioned In thiS or any future Issue, and such position may be different from any views now or hereafter expressed In thIS or any other IUue Jonney Montgomery 5colt, Inc, which IS regtered With the SEC as an Investment adVisor, may give adVice to lIs Investment adVisory and othel customers Independently of any statements mode In thiS or In any other lSue Further information on ony security mentioned herein IS avoiloble on request

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