Tabell’s Market Letter – May 30, 1975

Tabell’s Market Letter – May 30, 1975

Tabell's Market Letter - May 30, 1975
View Text Version (OCR)

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIYISION OF MEM8ER NEW YORK STOCK EXCHANGe, INC MEMBER AMERICAN STOCK EXCHANGE May 30, 1975 The Bullwinkle – Bearfeather Dialogues (con't.) (For those readers who missed last week's letter, the following represents a continuation of a totally fictitious dialogue between two equally fictitious market forecasters, one a perennial optimist and the other a similarly perennial pessimist). Bullwinkle Okay, I'll admit it's dangerous to draw on the 1950-60 experience in looking for parallels to today's new stock market, but I still don't see how you can be bearish after a bull market that's less than six months old. There is absolutely no precedent for a bull market that short except 1938. Bearfeather All right, so there lE..a precedent, and the aftermath of that one was a 3 1/2 year bear market that went to new lows. I don't see how you can be bullish facing a bunch of second quarter reports that are gOing to be unmitigated disasters. Bullwinkle Come on now. First of all, I don't think a 25-30 earnings decline, which is what we're probably looking for on the year, is an unmitigated disaster, especially since that decline comes after Dow-Jones earnings have just set a newall-time record. Furthermore, we all know the market bottoms out well before earnings do, and a bottom last December is perfectly consistent with a bottoming of corporate profits in the second quarter of 1975. Bearfeather Ah ha. You're saying corporate profits are going to bottom in the second quarter. in aClI, factttiey'don't – – – . . – – u .- . . – u Bullwinkle The leading indicator composite turned up sharply just this week. Bearfeather There are plenty of forecasters who are unimpressed by this, and who suggest that the present credit structure is overstrained and untenable. Bullwinkle I might believe them if they hadn't been saying the same thing for the past 25 years. Bearfeather Let's leave the fundamentals out of it for a moment. What about the technical picture Can you actually see the Dow getting through the ton of overhead supply that exists between 850 and 900 It seems perfectly clear to me that this is the logical area for the market to top out and turn downward. Bullwinkle Look,I have enough trouble analyzing what's already on the chart without trying to guess what may be on the chart six months from now. What technical indicators are telling us right now seems clear-cut to me. There have been absolutely no signs of loss of momentum. New highs still hold a comfortable margin over new lows, longer term totals of advances still comfort- ably exceed declines, long-term moving averages are still rising, and, probably most important of all, the potential breadth divergence that existed a few month's ago has now disappeared and breadth is in gear with the Dow on the upside. Surely you have to be aware that we have never had a market turn down without these factors turning negative. Bearfeather I certainly wouldn't say never, but in any case, I think they will turn negative very shortly. The overhead supply I'm talking about exists not only on the averages but on indiv- idual stocks. All too many stocks, including some of the institutional growth favorites, are ,-,.- ,- – …—- — — – -,.,…- — ; – – – – — – -,-,.-. — -… ,– reaching areas of heavy overhead supply. Bullwinkle I am not arguing that the overhead supply won't slow the market down. It undoubted- ly will, but supply has been penetrated in the past and will be again. I think this market has enough momentum to do it. Bearfeather You are a ….. Note The remainder of the dialogue is unsuitable for a family publication. We shall try to summarize the results of this debate on a more serious note next week.) Dow-Jones Industrials (1200 p.m.) 824.55 S & P Compo (1200 p. m.) 90.65 Cumulative Index (5/29/75) 501.77 AWT/jb ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL No statement 10 buy or sell or expreSSion of opinion or any other ooy security referred 10 or mentioned mol'er herein The mOiler IS contOlned presented IS, or IS 10 be merely for the cdoenevmereudn1C06boef dthleresdulbyscorrlbIenrdirWehcltlly on we offer or believe the OI.Cllollon of the sources of our on offer Informo lion to be reliable, we In no way represent or guarantee the otcurot' thereof nor of the statements mode herein Any o(1lon to be token by the subscriber should be based on hiS OWn investigation and Inftlrmallon Janney Montgomery Scofl, Inc, as a tarporotlon, and Its officers or employees, may now have, or may later Toke, posl1!0lU or ',odes In respect to any seCUrities menlloned In thiS tu ony future Issue, and such pa5111an may be different from any views now or hereafter e;tpreued In Ih.s or any other Issue Jonney Montgomery Scott, Inc, wh.ch ' registered With Ihe SEC (lS on InvestmenT adVisor, may g.ve adVice to Its Investment adVisory and othel customers Indendenlly of any statements mode 111 Ihls or 111 ony olner Issue Fvrlner information on ony secuTity mentioned herein IS available on request

Download PDF