Tabell’s Market Letter – August 15, 1975

– –. .,- — – I TABELL'S MARKET LETTER — — .—- – – , 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION Of MEMBER NEW YORK STOCK EXCHANGE INC MEMBER AMERICA.N STOCI( eXCHANGE August IS, 1975 Ir, -The market wound up the week with its essential dilemma still unresolved. We pOinted sllaceC out two weeks ago!n-ihls that the cruc1al-ieveI; insofar as thE;'DowJonesfndustrials–werecon cerned, was 815-800. The barrier was penetrated, although not decisively, on August 5 when the Dow reached a closing low of 810.15, but this was followed by six days of a rather tepid rally which brought' the Index to a closing high of 828.54 on Tuesday of this week. Ten points of this gain were then given up in Wednesday's and Thursday's trading. We have thus, at the moment, no real clue as to the market's near-term direction. We are lucky, however, in that it has now become clear, from a technical point of view, in what direction we should be looking for such a clue. If the cavalry is suddenly to appear over the horizon and res- cue the pres ent stock market, we know the direction of the horizon on which they will appear. That horizon will be in the area of the old line, heavy-industry cyclical issues — steels, papers, forest products, chemicals, non-ferrous metals and automobiles. The debacle in the market to date has been largely restricted to the first-tier growth stocks as graphically illustrated by the following table based on Wednesday closing prices. It shows the close for 11 growth issues on May 14 followed by their close just three months later on August 13. As can be seen, the average performance is a close-to-20 decline, four times as great as the Dow and three times as great as the S & P 500. The eight cyclical issues shown at the bottom of the table, however, have declined on average only 3.1 over the same time period, actually outperforming both averages. Subse- 5/14/75 guent High 8/13/75 Change 1-1I-Avon…..P..roductss 4'l95L8 — 39 … 3L820.17 – 1 Coca-Cola 92 92 1/2 76 3/4 -16.6 Disney Productions Eastman Kodak 543/4 1083/4 – 415/8 -24.0 917/8 -15.5 International Business Machines International Flavors & Fragrances 223 1/2 33 7/8 – 177 1/2 27 -20.6 -20.3 Johnson & Johnson McDonald's Corp. 97 1/2 59 99 – 86 1/4 -11.5 445/8 -24.4 Procter & Gamble Sears, Roebuck & Co. Xerox Average DJIA S&P 97 71 3/4 86 1/4 858.73 92.27 98 735/8 – 88 1/4 607/8 54 5/8 820.56 85.97 – – 57 7/8 40 1/2 73 3/4 – 41-1/2 – 9.0 -15.2 -36.7 -19.5 – 4.4 – 6.8 Downside Breakout 33 42 32 48 30 60 54 36 Having moved down as much as they have, the growth issues are almost uniformly in con- firmed minor downtrends, and lower prices appear indicated. However, were the cyclicals to avoid posting downside breakouts similar to those already posted by the growth issues, the general market might gain badly needed succor. For the cyclicals, the downside breakout level is noted in the table. Abillty of most or all of these issues to hold above the breakout levels indicated would constitute a highly constructive sign. Note The above comments are based on technical factors. Further information on all companies is available on request. Dow-Jones Industrials (1200 p.m.) 820.64 S & P Compo (1200 p. m.) 86.01 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (8/14/75) 488.01 AWT/jb No statement or expreUIon of oplnlQn or Clny other molter here,n olltomed IS, or IS to be deemed 10 be, directly or ,directly. on offer or the soliCItation of an offer to buy or sell any security referred to or mentioned The mOiler IS presented merely for the conver,enclO of the subscrIber While we believe the s.ources of our 'nforma tlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude hereIn Any actIon 10 be toen by Ihe subSCriber should be based on h,s own InvestigatIon and informatIon Janney Montgomery Scali, tnc , 05 a corporallon, and Its offIcers or employees, may now have, or may later toke, positIons or trades …. respect to any secufll,es mentIoned In thIS or any future Issue, and such POSItIon may be different from any vIews now Or hereafter erpressed In If1l5 or any other Issue Janney Monlgomery Scali, rnc, whICh IS regIstered WIth the SEC as on Investment adVIsor, moy gIve adVIce to lIs Investment odvlsory ond othel customers Independently of any statements mode In thIS or …. any other Issue Further informatIon on ony senmty mentIOned hereIn 15 avaIlable on request