Tabell’s Market Letter – December 12, 1975

TABELL'S MARKET LETTER .—— 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORk STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – December 12, 1975 I–''''''–,e''''''-''''- W e'suggested 'In'la stoweek' s Cletter-that -the–Bow' Jones'-Industrlal-Average'might'be' pa inting– a more bullish picture of what was taking place In equity markets than were broader-based indices, such as the S & p sao. It now appears that it is possible to carry this analogy one step further and suggest that even the S & P Index and similar averages may have been outperforming the average stock since the highs of last July. To do this, it is necessary to refer back to our old friend, the Cumulative Index which, readers will be aware. we have often referred to m this space. Briefly, the Cumulative Index is a geometric per- centage change average, covering every stock on the New York Stock Exchange and begun with a base date of May 1,1964, using as the base the Dow on that date, 817.10, a figure not too different from today's price. By contrast, of course, the Cumulative Index, reflecting the action of all stocks on the NYSE, is now, at 470.31, almost 350 points lower than it was 11 1/2 years ago. We have pointed out in the past that, in our view, the Cumulative Index more accurately re- flected what was truly taking place In the marketplace In a number of market epochs. Over the 1966-68 period, the Dow moved, roughly, from 1000 to 750 and back up to 980, failing to make a new high, while at the same time, the Cumulative Index moved from 1100 to 800 and on to a new high of 1430, more accurately reflecting obvious bullish market conditions that then existed. From 1968-70 both indices moved down, the Dow from 980 to 630 and the Cumulative Index from 1400 to under 700, but unlike the Dow, the Cumula- tive Index failed to make a new high in late 1972 and plunged precipitously far below its previous low In 1973-74, reaching a bottom of 347.85 last December. The purpose of this letter is to detail the recent ac- tion of the Index In an effort to pOint out more clearly what has been happening since the lows of a year ago. The following table gives the levels of the Dow, the Cumulative Index and the S & P 500 for nine selected dates over the past 14 months. Date DTIA – -10/4/74 -584.56 S & P 500 62.34 Cum. Index – 355; 9 r – 10/D2at3e775 ';,D85T5I'AE.17'6-eoSi9&1.3cPii81s'a1o0C;7;;;'i22)-C-u4!m'i9.'dI7n.0d;'ex-7,…,….J- — 12/6/74 7/15/75 9/16/75 577.60 881.81 795.13 65.01 95.61 82.09 347.85(12/23) 11/17/75 856.66 559.60 11/28/75 860.67 463.74(9/17) 12/5/75 818.80 91.46 91.24 86.82 494.21 492.81 467.78(12/9) 10/11/75 784.16 82.93 464.76 To begin with, the bottom of a year ago was, it will be recalled, a double one with two im- portant lows taking place in early October and early December. The Dow low was made in the December phase,but the S & P 500 held above its October low in December. The Cumulative Index, by contrast, con- tinued to drift off throughout December, not making its ultimate low until December 23. There followed the happy period of the rally which continued to mid-July. Here the Cumulative Index suggested that both the Dow and the S & P were affording an accurate description of market behavior, advancing 61, versus 53 for the Dow and 47 for the S & P sao. Smce that time, however, its action has diverged markedly from the other indices. All three indices moved down sharply following their July peaks and, again, a double bot- tom of some importance took place in mid-September and early October. As the table shows, the S & P and Cumulative Index made their lows at the first bottom while the Dow moved lower on October I. -What is in- teresting, however, is that the total decline in the Dow was only 11, while In the S & P it was 14 and extended to 17 in the Cumulative Index. The advance from the October low had three separate peaks, at the end of October, mid-November and the end of November. The Cumulative Index peaked out in late October after a 7 rise, while the S & Prose 11 Into mid-November, and the Dow continued for a 10 ad- vance in late November. Subsequent to that, all three indices posted lows on December 5th, the Dow down 14.9,-the S & P down 5.1 and.the Cumulative Index.(wh!9h c9ptinued mov!ng.lower,until this ruesday). ……. down 5.9. As all of this clearly shows, the average stock ha s, since the July pea k, been performing conSiderably worse than the major indices. At their lows of early this month, the Dow was down 7. 1 from its July peak, the S & P 9.2 and the Cumulative Index 16.4. Compared to their lows of September, both the Dow and S & P were four to five per cent above their September bottoms, while the Cumulative Index was within 1 of it. The Dow had retraced 21 of its early 1975 advance, the S & P 26 and the Cumulative Index almost half of the entire move,or 45. In short, the Index clearly tells us that what has been gOing on in the marketplace since last July is a good deal more serious than the more widely-followed Indices would lead us to believe. Dow-Jones Industrials (1200 p.m.) 828.72 S & P Compo (1200 p.m.) 87.47 Cumulative Index (12/11/75) 470.31 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWT/jb No statement or expression of opInion or any other motter herein contolned IS, or IS 10 be deemed to be, directly or Indirectly, on offer or the SollCllotlon of on offer to bllY or sell any securlly referred 10 or menhoned The motter IS presented merely for the convellenc of the subCrober While we believe Ihe sources of our Informa t,on to be reliable, we ,n 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 on hiS own Investlgallon and Informallon Janney Montgomery Scoll, Inc, as a corporation, and Its officers or employees, may now have, or may later toke, positions or trodes 1M respect to any seCUrities menlloned In thiS or any future Issue, ond such pOSition moy be different from ony views now or hereofter epressed In thIS or any other Issue Jonney Montgomery Scott, Inc, which IS registered With the SEC as on Investment adVisor, moy give adVice 10 lIs Investment adVisory and other customers Independently of any statements mode 1M thl5 or 1M any other Issue Further ,nformatlon on ony securIty mentioned herein IS OVOIlable on request