Tabell’s Market Letter – June 27, 1975

Tabell’s Market Letter – June 27, 1975

Tabell's Market Letter - June 27, 1975
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VOAK STOCK EXCHANGe, INC MEMBER AMERICAN STOCI( EXCHANGE Tune 27, 1975 — –l'rebablyAhe ctritest cliche,inJinanclaLwriting is the sJatement Jhat,Jhe market is' in need of a correction. It is a cliche that we have seen pop up with dismaying egulrtty-thro;ghout'the -etir –.- cours e of every bull market in our own twenty years of market experience and goes back much further, appearing in some of the oldest stock market books we have read. More than any other cliche we know, it flies directly in the,face of reality, since the record amply demonstrates that bull markets tend to have almost nothing other than very shallow corrections until their most advanced stages. The cliche was beginning to appear again last month after the market dipped from a mid-May high of 858.73 to a low of 815. 00 on May 29th, and proceeded to move sideways throughout the end of May and early Tune. The market, it was said, was in need of a correction and the 800-780 level was the number most commonly bruted about. However, in a move that could hardly be surprising to anyone familiar with the internal dynamics of bull markets, the market took precisely the opposite tack and last week crashed ahead to a new high, reaching a closing high of 874.14 on Thursday. Whatever it was the market needed, it apparently got it during the sideways trading range of May-Tune. The move did have in it some elements of surprise. When it turned down from the 860 level last May, the Dow had run into its first encounter with the heavy overhead supply at 850-900, the existence of which we have been boring our readers with, ad nauseam. It is, however, historically not uncommon, especlally under bull-market conditions, for overhead supply to be penetrated fairly deeply and fairly early, and the dynamics of this particular bull market were apparently strong enough to accomplish this. On a short-term basis, a number of fairly plausible targets exist. The base formed in May- June suggests an upside objective for the Dow somewhere in the 885-890 range. Patterns on the other averages are a bit more diffiCilrttO'tatl\orii' T1feUrll1ty a\l1lrageinasense7forecast-themove-;-lead– – ing the Industrials into new high territory in late May, and joining them on the recent move to new highs. On a near-term basis, the Utilities have reached one upside objective, and some consolidation might be plausible, but, if the trend toward lower long-term interest rates continues, it is possible to read an upside objective of 114 for that index versus its current level of 86. Here the Utilities would en- counter supply of the same magnitude as that now facing the Industrials. The Transportation Index, whlch, in the early stages of the bull market, had been leading the Industrials while the Utilities lagged, has now turned sluggish, and it is difficult at this time to formulate an upside target. The most probable course seems to be continued backing and filling in the 165-171 range. What we are talking about here, of course, are short-term objectives, and it is perhaps worth- while to examine the long-term picture. As our readers know, we have been advocating a fully in- vested posture while refusing to make any concrete forecasts as to long-range targets. We continue to think this is the prudent course to take. As we pOinted out last week, the market shows no signs of loss of momentum,and the soundest policy appears to be to relax and enjoy it without worrying too much about long-term forecasts. The current critical level as far as the Industrial Average is concerned is 900. A decisive pen- etration above this level would move the market through the overhead supply of 1973-74 and raise the possibility that all of the trading which has taken place since mid-1973 was part of a huge accumula- tion base. We would tend to be somewhat distrustful of an immediate penetration simply because, were the Dow to move through 900 immediately, it would find itself in the position of the bear in the song r that went. over the mountain and who promptly saw another. mountain. Were the Dow to penetrate the supply at 850-900 at the moment, it would face equally massive supplybetween 900 and 950, this – — – from the 1967-69 and 1972-73 tops. Thus, the most constructive technical action might, in fact, be a pullback, and, were this to take place, 800, another round figure, would become the crucial level! Were a decline to the 800 level to ensue and hold, everything that has taken place since April would- begin to look suspiciously like the right shoulder of a massive head and shoulders base before which, it seems to us, the last supply barrier would ultimately have to fall. Were this sort of action to ; develop, and it would probably take s Ix months or so for the pattern to complete, we could then be looking at some truly astonishing upside targets. Dow-Tones Industrials (1200 p.m.) 875.16 S & P Compo (1200 p.m.) 94.97 Cumulative Index (6/26/75) 537.33 AWT/jb ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL No statement or epreS510n of opInion or ony oher mottcr herein conlcllned Is, or IS 10 be deemed to be, directly or ,ndirectly, an offer or Ihe soliCitation of on offer 10 bvy or sell ony security referred to or mentIOned The matler IS presented merely for the convef'lenCC; of the subscriber While we believe the sources of our Informahon to be rehable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any action to be taken by the subSCriber should be based an till awn Illve5t'gcrflan and Information Janney Montgomery Scott, Inc, 0 0 corporation, and Irs officers or employees, may now hove, or may loler lake, posilions Of trades In respect to any securities mentioned In Ihls or any future ISSU!!, and such POSition may be different from any views now or hereafter epressed In thiS or any other Issue Janney Montgomery Scott, Inc, which IS registered wllh the SEC as on Irlveslmenl adVisor, may gIVe adVice 10 lIs Investment adVisory and other customers Independently of any statements mode 111 thiS or 111 any other Issue Fvrther 'nformotlon on any security mentioned h!!reln IS available on request

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