Tabell’s Market Letter – November 21, 1975

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08S40 DIVISION OF MEMBER NEW YORI( STOCI( EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGe November 21, 1975 A basic raison d'etre for technical analysis is the fact that there are two distinct and separate inputs to a stock price. The first of these is available fundamental information, both of a factu- al and a forecast nature. The second is investor expectations, which are not homogenous and may vary …. -widely over tiri'e. Sfnc-ettwo';lldbe difficult, if not impossible;'to-poflive-sfOrs t'o'ascertaiiithe state' – of those expectations, the only recourse available is to study their expression in price action. Thus, the profession of technical analysis. No judgment is made by the technician as to whether self-evident expectations are correct or incorrect. What is interesting, however, is that they are often widely at variance with accepted fore- casts. Thus, for example, stock prices enjoyed one of the sharpest six-month rises in history in the first half of 1975 in the face of an ongoing recession with no bottom clearly in sight, and when, at mid- 1975, the recession's bottom became apparent, they began moving sideways. The purpose of today's exercise is to attempt to draw a few generalities as to the current state of investor expectations and the areas in which those expectations are finding focus. The following two lists of industry groups are based on intermediate-term relative strength comparisons covering, roughly. the past thirty weeks with more recent data given heavier weight. With- out gOing into details of computation, it is possible, simply, to say that the groups in the left-hand list, labeled stronger, have been acting better than the market and the groups in the right-hand list, some- what worse than the market. This contrasting action seems to shed light on investor thinking in a number of areas. Stronger Weaker Apparel Hotel-Motel Aluminum Gold Appliances Meat Packing Banks Life Insurance Autos Motion Pictures Bldg. Material Mobile Homes Chemicals Paper Bus. Machines Offshore Drilling 1…. ,…..Dept..Stp.!esS.h)jol.le2!si—- C'-0a'!I O!2iI;;.';Crude Producers Food Food Chains Synthetic Fibers Variety Stores Copper Drugs R. E. 1. f. Savings & Loan Grocers Utilities Finance Cos. Horne Furnish. Energy. Included in the left-hand list are a number of groups which, at first glance, appear to have absolutely nothing in common, Autos, Chemicals, Food Chains, Hotel-Mltel and Utilities, and, yet, they all share a common thread — the fact that in one way or another, they are beneficiaries of lower fuel prices. On the other hand, in the-list of groups that have been acting worse than the market, obviously such industries as Coal, Crude Oil Producers and Offshore Drilling would be affected detrimentally by widely-available lower-priced oil. This phenomenon is especially interesting since no one that we know of is, indeed, forecasting lower oil prices. Yet, such an expectation seems to be built into the marketplace. Consumer Spending. Forecasts as to outlook for consumer spending in 1976 vary wide- ly, and there are broad differences of opinion. The stock market, however, apparently suffers from no such dichotomy. Apparel, Appliances, Department Stores, Food, Grocers, Horne Furnishings, Shoes. Synthetic Flbers and Variety Stores are all areas of industry that would benefit from a sharp upsurge in consumer spending. Yet on the other hand, the market is currently telling us that one area in which it does not expect increased consumer spending is in the home building area with Building Material stocks and, concurrently, Mobile Homes, showing below-average action. Basic Industries. In contrast with the improving outlook for consumer goods, stock buyers apparently have some doubt about the capital goods outlook, as witness the weakness in Aluminum, Copper, -etc. – These problems, of course, may be -only ,temporary,since It is difflcul!,to.see how.a sus- . – tained consumer-spending surge could fail to spill over into the capital-goods area. Finance. The market is apparently still expressing some skepticism about companies essentially in the money bUSiness, whether due to New York City's financial troubles or whatever reason. As can be seen, Finance Companies, Life Insurance, Savings and Loans and Banks are conspicuous by their presence in the list of weaker groups. . High PiE Ratios. Skepticism apparently continues as regards stocks with relatively high price-earnings ratios. Such industries as Drugs and Business Machines are conspicuous by their presence in the weaker list. Note The above comments are based on technical factors. Further information on all companies is available on request. Dow-Jones Industrials (1200 p.m.) 840.29 S & P Camp. (1200 p.m.) 89.38 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (!l/20/75) 487.23 AWT/jb No statement or expresSion of opmion Or any olher matter herein contained IS, or 15 to be deemed to be, directly Of indirectly, on offer or the SOllcltOllon of on offer to buy or sell any security referred 10 or mentioned The motter IS presented merely for the conver-Iencc of the subscriber While we believe the sources of our mforma tlon to be rehable, we m no way represent or guarantee Ihe accuracy thereof nor of the statement, mude herem Any actio to be lal-en by the sub;cber should be based on hu own mvestlgotlon ond ,nforma/lon Janney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now have, or may later take, positions or trades In respect to any seCUrllleS menl10ned In thiS or any future Issue, and such posillon may be different from ony Views now or hereafter expressed 10 thiS or any other Iss.ve Janney Montgomery Scolt, tnc , which IS registered wllh the SEC as on mvestment adVisor, may give adVice to lIS mvestment adVISOry and othel C'\Jslomers Independently of ony stalements mode In thIS or In ony other Issue further ,nformaHon on any secunly mentioned herein IS available on request