Tabell’s Market Letter – August 08, 1975

–. – –'- – , I I I, TABELL'S I MARKET LETTER — — — ,– 1 909 STATE ROAD, PRINCETON NEW JERSEY 08540 DIVISION OF' MEMBER NEW VORl( STOCI( EXCHANGE, INC MEMBER AMERICAN STOCI( EXCHANGE – – — – ,.'ho – – —-, -Augtrst'r8-;r97S—- om; ..''-'''-'- .I The market technician must operate on many levels. One of these levels is, of course, the analysis and recognition of patterns in indiv1dual stocks. He must try to identify re cent trading as e1ther accumulation or distribution and attempt to formulate, from a stock's past price history, upside and downside targets and probabilities. Insofar as th,S task is concerned, his assessment of the current stock market pi cture can hardly fail to be anything other than a gloomy one. It is barely four weeks Since the stock market made its last bull market high, but the amount of pattern deterioration which has taken place in that short period has, indeed, been fairly massive. The process began with the appearance of significant d,stribution in the first tier growth stocks as these issues moved up underneath the heavy overhead supply from the 1973 74 tops. The malaise, however, has spread far beyond these 1ssues, and distributional patterns now appear in a Significant number of the 1500plus issues which we follow. It should be noted at the outset that these patterns are not of the major variety, and, in the great bulk of cases, favorable longterm patterns would remain undestroyed were the shortterm objectivs of the dis tributional tops which now exist to be reached. The whole process, however, could add up to a stock market atmosphere which would be hardly pleasant. Another level cn which the technician must function, however, is as an inter- preter of general market indicators. It is these indiCators that we, frankly, find difficult to square with be distributional patterns which have emerged in individual stocks. As we suggested above, the Dow made its bull market high just last month. That high was accompanied by breadth con 1t'o.flirmation–andJabsolutelynoneoftbesigns..oLdeterioJationw,ehayecomet2assoc;iate wi,thcw,the I–l long and usually slow process of forming a market tcp. Any downward momentum which might develop from here, therefore, would have to be placed in a category we have previously called a surprise decline, and the almost universal characteristic of declines of this nature is that, however painful they are while continuing, they tend to be followed by another attempt, at least, on the previous high. Still, a third level of the technician's work is that of a market historian. If the closing level of 881. 81 on July 15, 1975, is to prove to be a bull market top, this will constitute a bull market which has lasted for only 151 trading days. Such an animal 1S a rare beast, indeed, and is, in fact, by postWorld-War-1I standards unprecedented. The bull market of 1942-46 lasted 1211 trading days, the one of 1949-56, 1807 trading days and that of 1957-61, 1043 trading days. There has been some tendency toward a shortening of the time span since. 1962-66 was 913 trad- ing days long, 1966-68,518 trading days, and 1970-73,665 trading days. None of these, of course, remotely approaches the 151 trading days chalked up so far. Going back to the 1930's, we do have one possible precedent. The bull market of March-November, 1938, scored a 60 advance (slightly more than the current one) and did it in only 187 trading days. Even in that case, however, a 23 decline was followed by a renewed advance on the old high which was ultimately frustrated by the outbreak of hostilities in Europe. Although we strongly feel the market has, in many ways, radically altered its character in the past few years, it 1S difficult to envision as drastic an alteration as this one. We have warned in this space in the past against the bull'bear syndrome, that -isthecompulslve'terideiicVt(y-sfick-labels on every stock market-era-We tlllnk,thispatticolar– Iy dangerous in the present instance. A large number of issues, based on their technical patterns, are, at the moment, probably inappropriate as conservative investment vehicles. These issues, if still retained, should in most cases be sold. A number of others with favorable long-term patterns appear to present some fairly real short-term downside risk. The decision as to whether or not issues of this type should be retained will depend in large part on the investor's assess- ment of his own agility and his ability to reenter the market should the pattern agam turn favor- able. From a general market point of view, we think the possibility of lower pnces must be recognized without the compulsion to read cosmic portents of gloom and doom. Available evid- ence at the moment simply does not justify thfs sort of attitude. Dow-Jones Industrials (1200 p.m.) 821.03 ANTHONY W. TABELL S & P Compo (1200 p.m.) 86.49 DELAFIELD, HARVEY, TABELL Cum. Index (8/7/75) 497.73 AWT/jb No statement or expreslon of OPiniOn or any other moiler herein contained I, or IS to be deemed to be, dlfectly or Indlreelly, on offer or thc soliCitation of an offer to buy or sell any security referred to or mentioned Themall!.!rls presented merely for the conVCllenct of tne subscriber Wnde Ne believe the sources of our Information to be reliable, we In no way represent or guaranTee Ihe accuracy thereof nor of the statements mude herein Any aellon 10 be taken by the subscribe' shOuld be based on nlJ own investIgatIon and informatIon lanney Monlgommy .xotl, Inc, as a corporuhon, and I/S offIcers or employees, may now halle, or may later take, POSitiOnS or trades In respecl to any secuflhes mentIoned In thiS or any future Issue, and sucn position may be different from any views now or hnreafter expres;ed In thiS or ony other Issue Janney Montgomery Scott, Inc, which IS regIstered wltn the SEC as on Investment odvlsor, may gIve adVice to Its Investment adVisory ond otnel customers Independently of any statements made In tnls or In any other Issue Funher information on any securoly mentioned nereln IS aVailable on request