Tabell’s Market Letter – July 03, 1975

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08!540 DIVISION OF' MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGe July 3, 1975 As the Fourth of July approaches, comments are beginning to emerge on the traditional summer ..- – rally. Long-time readers of this letter will be aware that we have examined this phenomenon at the O!iSet'oftfie'pasCtwo inimmerTalfdexpressedii mlld'degree of sKepflcfsrtnbout If''''The f611owlng- table, updated through 1974, shows the number of advances and declines for the one and two month periods ended each month of each year from 1926 through 1974 together with the average percentage change for the period. ONE-MONTH PERIODS TWO-MONTH PERIODS Ending Month Advances Declines Avg. Chg. Advances Declines Avg. Chg. January 32 17 0.70 32 17 2.14 February 27 22 -0.04 27 22 0.65 March April 26 23 -0.23 27 22 0.82 23 26 -0.38 29 20 0.68 May June July August September October November December Total 25 24 -0.83 29 20 0.23 23 26 0.81 23 26 -0.07 33 16 2.13 31 18 2.89 32 17 1. 55 35 14 3.84 21 28 -1. 36 . 29 20 0.15 27 22 -0.29 24 25 -1. 60 28 21 0.37 30 19 0.12 E –.!. 338 250 1. 33 0.41 –l1. E 1. 74 344 244 0.86 The table shows the action of the Dow-Jones Industrial Average in every one-month and two-month period from 1926 to 1974. For each period the number of instances when the market advanced and de' -Cilned is- -s!lown,' regetner with-thea-verage percenfage'Chah-ge-for the -p-erlo(l'–Aprellmlnarytookat'the table, Indeed, supports the notion of a probable summer rally. – The average monthly advance for the Dow over the period has been .41, whereas the average performance in July is an advance of 2.13, more than five times as great. Likewise, the average advance of 3.84 for the two months ended August is four times larger than the average two-month advance. It would, indeed, appear that the expectation of an advancing market during July and August has some solid grounding In fact. Having made this statement, however, a few doubts must be raised. The first factor which needs to be pointed out is that a large part of the high average advance for the summer period rests on the accident of the 1932 bottom's having occurred at the end of June. Thus, July and August of that year produced the largest two-month advance in stock-market history, an astounding 70 rise. If this sin- gle year is eliminated from consideration, the results for July and August are much closer to normal. Secondly, while it is true that July and August do show significant pluralities of advancing months over declining months, It must -be remembered that advancing periods tend to outnumber declining ones over the 49 years by almost three to two. When standard tests of statistical significance are applied, the period with the clearest seasonal action Is the month of December, which is why this letter has always emphasized the importance of the year-end rally. Likewise, the tendency toward a declining market In September Is statistically more significant than that of a rise In July or August. Interesting- ly enough, none of the other months show any discernible seasonal pattern whatsoever. Lastly, in looking for seasonal patterns, it is wise to examine the most recent data to see if it seems to be deviating from the past and, indeed, this Is apparently the case. The nine years between 1966 and 1974 have produced three rallies and six declines in July and five rallies and four declines In -August, but'the tWo-monthperiod entled August ha-s produced'four rallies 'and-five declines with an- average percentage change of -1 . Even the familiar December rally rappears to have lost Its recent reliability, and, interestingly enough, a new seasonal tendency, not heretofore apparent, seems to be emerging — that of a decline in May-June, although, it must be admitted, the bull market of 1975 was strong enough to override this tendency. Every May, from 1965 through 1974, with the single excep- . tion of 1972, has produced a declining market, and all two-month periods ending 10 June showed declinE in the 1965-1974 period. The moral of the whole exerCise, we suppose, Is that the stock market is a difficult and changing beast, and, while certain seasonal tendencies are apparent, they constitute only one factor In what Is invariably a highly complex equation. Dow-Jones Industrials (1200 p. Iii.) 871. 40 S & P Compo (1200 p.m.) 94.35 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (7/2/75) 538.91 AWT/jb No statement or expression of opInion Of cny other moHer herem contolned IS, or IS 10 be deemed to be, directly or mdnec11y, on offer or Ihc 50lu;llollon of on offer fa bvy or sell any security referred 10 or men/loned The matter IS prescnred merely for the converllnce of foe subscriber Wulc we believe Ihe sources of our Informa. t10n to be reliable, we In no way represent or glJorontee the accuracy thereof nor of the statements mode herein Any cc;1lon 10 be token by the subscriber should be bosed on hiS own investigation cnd Informotlon Janney Montgomery Scott, Inc, 0 a corporatIon, and lIs officers or employees, may now hove, or may loter tole, po,ltlons or trades In reSpect 10 any seCUrities mentioned In thiS or cny future Issue, end such pOSlhon may be different from any views now or hereafter exp.essed rn this or any other ISsue Janney Montgomery Scott, Inc. which IS registered With the SEC as on rnvestment adVISor, may give advle to 15 rnvestment odvn.ory and othel customers Independently of any statements made In thiS or In any other Issue Further information on ony seCUriTy mentIOned herein IS ovollable on requeU