Viewing Month: January 1976

Tabell’s Market Letter – January 01, 1976

Tabell’s Market Letter – January 01, 1976

Tabell's Market Letter - January 01, 1976
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'EC!NUC! OAT! ………. 14l1li . ,371'101 CIoIANG! FO THI! DOW V!AII!NIl 1l0W . '1,51!! !ol,ZI!! JON!8 !NIlUSTIIIlL. AVEIIA!;I! ,IIOH pReI!NTGI! eHlNr.& e7'! tell9 1'102 1'103 '1,95 4/0, 'I' .1,9& 24,211 1'104 1'105 9,51!! '13,05 481'1 H,8& 1'10' 1'107 1408 1'10'1 911,40 '!9,15 ,e.85,'!!! 1,4'! e 4H4,,23 14,4'1 1'110 81!1,9'! el7,4 01 I 11 1'12 80,85 88,10 ,.0; 12 8'91 rII'!., 1'Il! 1'114- 1'115 1'1111 17,10 '–550i1 . 'I7,0l'! '18,50 .- eU e 28 , ' – -,,- —…- —-;;.. II r 3 1,55 1'111 10, Z' e2873 1'118 U,II5 \1 45 I'll 'I US,80 UJ;! 1'120 19i!1 T2,21! n,n eI,7 10,53 1'122 97,lI! 1b8 1'Ii!3 '14,10 .3;0'1 1'124 115,115 l!i!b'l 1'125 154,55 n8' 1'12 157.21!! 1.71 1'12' 211l2,40 875 1'128 300,0' 48.2 1'12'1 2 11 8,48 el711 1'13 114,58 -33,77 131 1'12 1'133 1'134 17 OIl'! 59,'13 '19,90 l1li11 ,1!l4 -52; ,,'Irlll' 4la 1'135 1'13. 1'137 1'138 1411,13 IT 'I ,'I!!! 120,85 1'!4,7 – 38 '. 53 24',82 , -lZ','8i! – 280 –. I 3'1 150,24 e2,92 1'140 1'1111 1'1111 19113 131013 1\0,'1. 119,40 j35n r-127 15 n 1.bl 1381 1'1114 1'1115 152,32 1'12,91 120'1 ,,,,'i l'1U 177 ,2111 .814 1'141 181,1 2',23 1'14R 1'14'1 177,30 200,13 .i!13 U; 8 I 'lSI!! 1'151 1'15i! 1'153 i!35,41 29,23 2'11,90 280,90 t17 ! 14,31 8,42 3.11 1'154 1'155 404,3'1 488,41! 113'1 0,7 1'15 4'19,111 Z' 21 1'151 I'1SA .U.5'1 I'IU 1'1&1 1135,11'1 581.84 – – – – 0 -.. – 131,14 -U,1 nIII5 1a1 – ' 1 , 3 4…. – – – – – – – – – , -……..—- ..— 18,11 1'1112 &52,10 -10 8 I 1'13 1112,'15 11,011 1'1&4 8111 oil 14I51 1'1115 '1/19,2/1 10,8 l'1b& 185,6'1 -18.'1 4 I' 1'168 '1S,11 943,7 15i!QJ 11'2 1'111'1 SCIHl,3& -151'1 1'110 838.'12 /1'811 1'171 890,20 1111 1'172 111120,0i! III', 5 I'ln 850,811 .. t('5 1'114 &1&,24 e11151 1'17'5 852,111 38', 3

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Tabell’s Market Letter – January 02, 1976

Tabell’s Market Letter – January 02, 1976

Tabell's Market Letter - January 02, 1976
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–'IE- – TABELL'S MARKET LETTER – ..1. 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK E)(CHANGE, INC MEMBER AMERICAN STOCK EXCHANGE January 2, 1976 . ' ,.Er sQme rSeno,w , weha '(. .!ltudJEd th efa mil lals.e.o.nal,tend encyof,th e. stock-rna rk ettostag 6a year-end rally, and it has been the custom of this letter around the New Year to point out some of the conclusions that can be derived from a study of this phenomenon. We have suggested that an exhaustive study of chart patterns, since the Dow-Jones Industrial Average first was computed in 1897, indicated that such a rally, however miniscule, invariably had taken place. As a reference to this exercise, the table on the reverse page shows the yearly percentage change of the Dow-Jones Industrial Average since 1900. A number of interesting facts about the market action of the year-end may be noted. (1) – As stated above, an identifiable year-end rally has taken place in every year since 1897. This rally often has been of great magnitude with advances as great as 28 having been recorded. It also, on occaSion, has continued with only minor interruptions for as long as six months into the new year. However, on other occasions, it has been of only a few days' duration, reaching a top extreme- lyearly. Thus, In 1960, 1962, 1970 and, most recently, in 1973, the rally reached a peak m the first week in January. In 1961, 1964, 1967 and 1971, It continued Into February or March. (2) – There has been a perSistent tendency for the rally to begin early In years when the market has been up, and late in years when the market has been down. In recent upward years, 1959, 1963, and 1967 are examples, the rally commenced from early December. In recent downward years, 1962, 1966, and In 1969, it began late in the year. The year-end rally this year started early on December 5, 1975, an up year, at 818.80, and is no exception to this rule. (3) – The important thing to watch in connection with market action in the early months of the new year -is-d;he-1Gw-f0 the -.peviGu s D ecember.-T-h is40w-ha s cbeen-broken-in-forty-five -yea rsout-of-1he–….,,,–I past seventy-five. However, in twentY-Six of these forty-five cases I it was broken In January and February. Smce 1937, it has never been broken later than mid-March, with the exception of 1965 and 1974. Thus, if the market is able to hold above its December low for the first 2 1/2 months of the year, chances become good that this low will not be broken. For example, In 1969, 1970, and 1973, the December low was broken early In January. In 1963, 1964, 1967, 1971, 1972, and, most recently, 1975, it never was broken. 1965, an up year, and 1974, a down year, as noted above, were unusual with the December, 1964 closing low of 857.45 being broken In June when the Dow closed at 840.59 and the December, 1973 low of 788.31 being broken in July when the Dow closed at 770.57. (4) – In years when the December low has been broken, the subsequent trend has been downward two-thirds of the time. 1962, 1966, 1969, 1973, and 1974 are typical cases. Again, 1965 was an exception. 1970, of course, was a down year in the first half. (5) – The magnitude of the rally Is an Important clue as to the year's market trend. For example, an advance of 10 or more from the December low has been followed by an upward or neutral market in thirty-two of the thirty-eight years that such an advance has occurred. An advance of less than 10 from the December low before an identifiable correction takes place has been followed by a downward market in twenty-five of thirty-seven years, In 1963, 1964, and 1971, the year-end rally approximated 10, and in 1972, it was 17. In 1962, 1970 and 1973, for example, it was less than this figure. (6) – The length of time in which the rally continues mto the new year also is Important. For ex- ample ( in twenty-one years, the ra tly continued into March or later. In eighteen of these twenty-one years, the eventual trend was upward. In 1964, 1972, and 1975, the year-end rally contmued mto March and in 1961, 1963, 1967 and 1971 into February. The most recent painful exception as previously noted —- -. '- – — -was 1974. – –……- – – – – – -.- This year, therefore, the previous December closmg low of 818.80 becomes an Important reference pomt to watch. On Wednesday of this week the Dow-Jones IndustrIal Average closed at 852.41. The fact that this average has already advanced approximately 4 must be viewed constructively. If the rally continues in magnitude and contInues into February or March, historically a good market year would be indicated. Dow-Jones Industrials (Il00 a.m.) 853.00 S & P Camp. (1100 a.m.) 90.35 Cumulative Index (I2/31/75) 490.81 RJS/jb ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL No statement or exprelon of OpinIon or ony other matter here'n contaIned IS, or IS to be deemed to be, dlredly or indirectly. on oHer or Ihe sol'c,lollon of an oHer to buy or sell any secunty re!erred 10 or mentioned The molter IS presented merely for the conver,ence of Ihe subSCriber While we belIeve the sources of our ,formotlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the sotemenl mude here,n Any action to be taken by Ihe subscriber should be based on hiS own inVestigation and information Janney Montgomery Scol!, Inc, as a corporatoon and ,ts officers or employees, may now hove, or may later lake, positions or trades In respect to any securities mentioned In llIs or any future Issue, ond such position may be ddferent from any views now or hereafter eypressed on thiS or any other Issue Janney Montgomery 5coll Inc, which 15 registered With the SEC as on ,vestment adVisor, may give adVIce to Its Investment adv,wry and othe, customers mdependent!y of any stateme'lts made In thiS or In any other Issue Further information on any security mentioned herein IS avadab!e on request

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Tabell’s Market Letter – January 09, 1976

Tabell’s Market Letter – January 09, 1976

Tabell's Market Letter - January 09, 1976
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TABELL'S MARKET LETTER 909 STATE ROAD. PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE January 9, 1976 We suggested in this space two weeks ago that the most plausible 1976 forecast -called for the approximateshape of an inside year',–underlining the word'''approximate'' and – suggesting the likelihood, based on historical precedent, of a move to highs somewhat above those of mid-1975, probably in the early part of the year. This forecast was based in part on the following line of rea soning . 1) The move from 577 on the Dow at the end of 1974 to the July high of BB1 constituted the primary phase of a bull market. 2) Bull markets tend to move higher following their initial phase, but generally not a great deal higher in terms of amplitude. 3) However, from an elapsed time point of view, bull market conditions often persist well after the initial high is made, having done so in the past for as long as two years. As 1976 opened, that early part of the year in which we had thought the new high might be made turned out to the the very first week, and the arrival at that high was accompanied by a blaze of fireworks worthy of the introduction to the Bicentennial. In the first five trading days of the New Year, the Dow advanced a breathtaking 55 points as volume skyrocketed to new pea ks, trading activity moving above the 3D-million share level on both Tuesday and Wednesday. In the process, the year-end rally extended to a move in excess of 10, which has in the past been suggestive of an upside stock market year. Forecasts, of course, are made to be revised in the light of changing conditions, but we do not think even the amazing strength witnesserl over the past week is yet, in and of itself, sufficient to alter dramatically the stock-market outlook. There is little doubt that the .. . weeksupside breakouLtoJlewhighs portends.beJter.eq.uitv.-mar.ket conditions .over-the short . term. The degree of permanency of these conditions can be ascertained once the fires burn themselves out and the various indicators begin to fall into place. -,- What are SOme of these indicators To begin with one of the old classics, a first requirement for positing ongoing bull market conditions, would be a confirmation of the move to new highs by various breadth indices, something that had not yet been done even after last week's strength. This lag is hardly unusual. Indeed, it is normal for breadth to lag the Dow on the upside as far as time is concerned. However, ultimately breadth will have to post a new high or else the failure to do so will have to be viewed as a sign of weakness. In addition, we would like to see upside volume,which has been lagging on a long-term ba sis, swing back into gear with the market. Last week's heavy upside tradmg will undoubtedly have some effect on our long-term volume indicators, but one week of trading, even one as dynamic as this one, will be insufficient to turn long-term series around without future volume follow-through on the upside. Fmally, we will have to see more upside breakouts, through the recent overhead supply, on the part of individual stocks. A number of these breakouts took place last week, but a fair number of issues still lag well behind the Dow in relation to the supply from late 1975 tops. We have pointed out many t,mes the significance of the area between 900 and 1000 as far as the Dow-Jones Industrial Average 's concerned, suggesting that, on no fewer than 14 occasions in the past 13 years, this area has been penetrated, only to turn the average back by. at'least 100 pOints. We ha-';'; now moed in-to this -areafor the 15th ti',and lt remains to be seen whether it w,lI once more constitute an effective ce,hng. The major point to be made, we think, is the fact that if the trading range of the past 13 years is about to become a piece of market history, the ultimate upside targets are so s'gnihcantly above current levels that even late recognition of the fact will prove highly rewarding. Meanwhile, we woulrl prefer to await confirmation by the indicators mentioned above and others before feehng that the outlook for the upcoming year has truly changed all that radically. Dow-Jones Industnals (1200 p.m.) 909.95 ANTHONY W. TABELL S & P Compo (1200 p.m.) 94.74 DELAFIELD, HARVEY, TABELL Cumulative Index (1/8/76) 522.06 AWT/jb No statement or expression of opinion or ony other motter herein cont(llned IS, or IS 10 be deemed to be, directly of indirectly, on offer or the sollc,totlon of on offer to b\Jy or sell any seaHily referred to or menhoned The motter Is presented merely for the conVef'lence of the subscrober WIllie we believe the sovrces of our Informahan to be reliable, we m no way represent or guarantee the accuracy thereof nor of the statements mude herem Any action to be token by the subSCriber should be based on hiS own mvestlgatlon and lnformatlon Janney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now hoe, or may later toke, positions or trades In respect to any seCUrities men honed In thiS or any future Issue, and such POSition may be different from any Views now or hereafter expressed In thiS or any other ISSlIe Janney Montgomery Scott, Inc, ……h,cn Is registered With the SEC os on lnvestment od.. lsor, may gIVe od….,ce to Its Investment adVISOry and olhel customers Independently of ony statements made In thiS or In any other Issue Further information on any secuflty mentioned herein IS available on request

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Tabell’s Market Letter – January 16, 1976

Tabell’s Market Letter – January 16, 1976

Tabell's Market Letter - January 16, 1976
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————————————————————————————————–. TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER A.MERICAN STOCfC eXCHANQE January 16, 1976 ThU!Y!1 micoll.pS ide9Jilm,-a nd .llaq,lyJncrea s eptrad ing activity. thatccharac.terizedthe flrt weekof T976 c;;ntinuedTr;theyea/;seconcrwe;k' Mod;yc;;tittitd-theventh staight– trading day of the year on which a sharp advance was posted, and, after profit-taking on Tuesday, a new closing high of 929.63 was posted at midweek. Volume continued to exceed the 30-million share level, and, on Thursday in a seesaw session, posted a newall-time record of 38,450,000 shares with a tape at one point running a half-hour late. Most financial writers have run out of superlatives to describe the last two week's ac- tion basing these accolades, apparently, on the general theory that up is good and heavy volume is good. We have no particular objection to these principles, if applied on a limited basis, but, if one searches through past history. for evidence of the meaning of the last two week's market action, the results are, at least partially, inconclusive. Let us take the up part of the pair first. The Dow advanced 8.21 in the seven days ended January 12, and 9.06 in the nine days ended January 14. For the postwar period these ad- vances are rare birds, indeed. There are, for example, only seven instances of an equal or greater seven-day advance being posted since 1940, and four of these have been in the past two years. As is the case with many indicators, however, if one goes back to the 1930's, one finds an entirely different sort of record. By the standards of this period, the 8.2 advance of 1976 to date seemS piddling, and there are repeated instances in the period 1929-40 of seven-day advances consider- ably greater. The record seven-day advance, back in the days when men were men and stock mar- kets, apparently, stock markets, was 30 in August, 1932. As for significance, again a different story is told by the postwar period and by the 1930' ReceriChisloty would call-for if stronglY bullish fnterpretatiori The1ir-evious sixin .- – –…, stances of comparable advances all occurred around or shortly after major bottoms, two of them in 1962, one in June, 1970 and the last three in October, 1974, January, 1975 and April, 1975. It must be noted, of course, that at least five of these six previous instances, however, took place after sharp declines, thus fitting securely into the niche of post-selling-climax rallies, wherea s the current one occurred after a mild six-month consolidation. Again, however, the thirties are telling a different story, with rallies of the present magnitude being common during ongoing downswings. No fewer than five instances, for example, occurred during the top forma- tion and subsequent decline in 1938-42. As far as volume is concerned, the first thing to be noted is that despite the records, it is not really all that unusual. If one measures average volume level for a given period by a 200-day moving average, the advancing volume of January 7 represented 186.8 of that average. Advancing volume days of greater than this amount are, interestingly, fairly common even through- out the postwar period, and, while they have, indeed, conSistently occurred at or around major bottoms, they have also taken place at almost all stages of all sorts of market cycles. Even the sharply late tape is somewhat explicable. The trade-reporting mechanism had little difficulty reporting comparable volume in early 1975. It is, It would seem, the additional trades from re- gional exchanges being reported in the composite tape experiment which have rendered it incapable of handling 30-plus million shares. We said last week that we did not feel that the advance, In and of itself, constituted evidence-of'iiraaiGa'lly changed stock market cllmi'lte–;-and we sfilnnink-this isine-case,although there is no doubt that it could prove the first link In a chain of evidence pointing to a dramatically improved long-term, equity market outlook. The process of improvement of long-term technical patterns for individual issues continues, and, if thiS goes on, a highly optimistic, long-range potential for the market will have to be recognized. At some point, however, the dust will settle and we will be able to assess that potential In a more rational climate. Dow-Jones Industrials (1200 p.m.) S & P Camp. (1200 p.m.) QllTUlative Index (1/15/76) 538.95 AWT/jb 926.79 96.90 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL No statement or expression of opinion or any other matter herem contained IS, or IS to be deemed 10 be, directly or indirectly, on oHer or the SOI,Cllo/lon of on offer to buy or sell onr. sectmty referred 10 or mentioned The maller IS presemed merely for Ihe convef'lence of the subSCriber While we believe the sources of our information to be rellob e, we In no way represent or guarantee the accuracy thereof nor of the slolemenl mude herem Any action to be tok.en by the subscflber should be based on hiS own investigatIOn and information Janney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now have, or may 10ler lake, pOSitions or trades In respect to any Se(IJrllle, mentioned In thiS or ony Future Inue, and such position may be different from any views now or hereafter epressed In thiS or any other 'Sue Janney Montgomery Scolt, Inc, which 15 registered With the SEC as on Investment adVisor, may give adVice to lIS Investment adVisory and other (ustomers mdependently of any stotemenls mode 111 thiS or In any other Issue Furlnel information on any seomty mentioned herein IS available on request

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Tabell’s Market Letter – January 23, 1976

Tabell’s Market Letter – January 23, 1976

Tabell's Market Letter - January 23, 1976
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TABELL'S MARKET LETTER I \ I I 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBeR NEW YOFIK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE January 23, 1976 The third week of 1976 provided just about as much in the way of upside fireworks as tlie'msT1woMonaay's-markElt sWw-,,–I,'!'poinCadvanc,noanew highonne'Dow-and-on-1'U;jS – ..,.. day, what was, around noontime, a modest decline reversed itself and turned into another six- point advance. Wednesday's trading followed the same pattern, with a sharp decline in the early morning turning into a move to a marginal new high in the afternoon. Shortly before the close a mild sell-off, which continued on Thursday, set in. Not unexpectedly, most breadth indices, by last week, had confirmed the new peaks in the major averages, thus underscoring the probability that the advance which started last December, however far it may eventua lly wind up carrying, will ultimately be viewed, in an his- torical context, as the second leg of the major bull market which began at the end of 1974. To those of us whose profession is commenting on the stock market, there is always some pressure to venture a guess as to how far any move underway, may eventually carry. We are reluctant at the moment to put forth any hard and fast opinion on the subject. A basic prin- ciple of technical work is that the ultimate extent of a given move depends upon the size of the accumulation base which precederl it. The problem at the moment is that there is some difficulty in determining just what was the base for the current upsirle move. One interpretation would have it that the base was formed over the July-September period and that the sirleways trading of Octo- ber-December was simply a consolidation pr eceding the January takeoff. Under this view, the Dow had alreacly reached Its most plausible upside objectives at recent highs. If one, however, is to view all of the second half of 1975 as part of the base formation, somewhat higher upside objectives, modestly above the 1000 level,are, indeecl, readable. – – – -'–The 'point -is..,.,-howeverl that-itis -not-really-necessary to-spenda -great -dea-I-of4ime – .. at this stage in trying to formulate upsicle targets. We have tried to clraw in this space in the past the nistinction between forecasting and investment policy, emphasizing that while the form- er is an interesting exercise and often necessary, it is the latter that rletermines stock market profits. Many investors seem to be nervous about advancing markets, feeling that they will, somehow, turn around on a dime and crash back to whence they came. The one thing that a study of market hIstory tells us is that this, indeed, is seldom the case. The most bearish possible assumption that one could possibly make about the current market is that the high scored th,s week constituted a major peak, an unlikely assumption, it must be emphasized, but a possibility. The following table takes seven major market peaks over the past 23 years and shows the percentage decline on the Dow at selected later monthly intervals A close look at the figures should give some reassurance as to the minimal downside risk posed at this point. PERCENTAGE DECLINE NO. OF MONTHS LATER Date of High I2 3 4 5 6 9 12 Jan. 5, 1953 -0.88 -3.05 -6.34 -5.33 -8.90 -7.92 -9.57 -3.35 Apr. 6,1956 -1.57 -7.77 -3.25 -1.38 -2.16 -7.64 -5.22 -8.06 Jan. 5,1960 -7.95 -11.04 -9.76 -10.87 -8.24 -6.50 -15.71 -9.33 Feb. 13,1961 -3.46 -2.80 -1.55 -6.40 -10.82 -23.39 -17.81 -12.21 Feb. 9,1966 -6.75 -5.82 -10.02 -10.39 -10.95 -15.74 -18.61 -13.83 Feb.-3,-1968- -6.49 -3.91 -6.-52.-5.. 25 .-2.78-8.18 -16.18 -20.42- Jan. 11, 1973 -5.72 -6.93 -8.34 -13.50 -12.95 -15.76 -7.19 -19.99 As the table quite clearly shows, there has inevitably been some period well after past market peaks when prices were down from that peak, but only a monest amount. Even in cases like 1968 where the initial declme was sharp, there was, as the table mdicates, some, subsequent recovery. It is for this reason that we prefer not to indulge at the moment in the forecasting game. What the market has incontrovertIbly shown us, at least as of mIn-week, IS that bull market conn itions are still unrlerway. Confucius' well-known anVlce about the inevit- able, Relax and enjoy it, appears applicable in the present instance. Dow-Jones Industrials (1200 p.m.) 948.60 ANTHONYW. TABELL S & P Compo (1200 p.m.) 98.70 DELAFIELD, HARVEY, TABELL Cumulative Index (1/22/76) 553.19 lIWT/jb No stctement or expreSSion of opinion or any other matler here'n contomed IS, or IS 10 be deemed 10 be, dHec11y or Indirectly, on offer or the 501'ClI0110'l of O'l offer 10 bll)' or sell cny security referred 10 or mentioned The mOiler IS presented merely for the conver-rence ef the subscrrber Whrle we belreve the Ources of our rnformohon to be relroble, we In no way represent or guarantee the occurocy thereof nor of the stclements mode herem Any actron to be teken by the subscriber should be based en hrs own Investigation and information Jenney Montgomery Scott, Inc, as 0 corporatron, and Its offrcers or employees, may now hove, or may later take, peslhons or trades rn respect to any seCUrities mentioned rn thrs or any folure Issue, ond such pesltlon may be ddferent from any views now or hereafter expressed 1M thiS or any other rssue Janney Mentgamery Seoll, Inc, which IS registered With the SEC as on mvestment adVisor, may give adVIce to rts Investment adVISOry and other customers Independently of any slotements mode In thiS or In any other Issue Further .nformallon on any security mentioned herein rs available On request

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Tabell’s Market Letter – January 30, 1976

Tabell’s Market Letter – January 30, 1976

Tabell's Market Letter - January 30, 1976
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TABELL'S MARKET LETTER 909 STATE ROA.D, PRINCETON, NEW JERSEY 08!540 DIVISION OF MEMBEI'I NEW VORK STOCI( eXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE January 30, 1976 We have noted in this letter the central technical fact that the stock market has remained, for the past Jozen years, in a trading range with a ceiling around 900-1000, DJIA. More recently, we have focused on whether the current strel'lgth represents an upside breakout from that range. Our long-time friend and vetI—lf–o–'efa'r;'-fnvestriie-rit advisor; Gleri-CatererC ha's, -cogently' in our'vlew examined the sam question from fund amental paint of view and has kindly permitted us to reproduce his thoughts below. A. W. TabelJ As compared wlth past periods of assault upon Dow 1000, price-earnings multiples this time around are historically low. This relative must be appraised on the basis of earnings quality, the earnings trend and competitive interest rates. It is difficult to determine a proper PER. History is not very helpful; conditions have changed too much. Prior to 1929, with a 5-6 bond rate and little inflation, an average price-earnings multiple of 10 was widely accepted as normal. The depression, the New Deal, elimination of the interest rate as a compet- itive investment factor, and the World War changed all that. Then came the early 1950's. The ease with which we emerged from the post-war recession, the effect upon inflation expectations of our further move into the world arena via Korea, and the mushrooming of institutional investment in equities established new bases for the valuation of common stocks. And now these bases probably have been destroyed by the fi- nancial strain brought about by the persistence of inflation at unprecedented peace-time rates. Thus the price-earnings multiples of 17 on four previous occasions when the Dow-Jones Industrial Average attempted to penetrate 1000 are not relevant to the discussion of multiples today. In addition to the depressing effect of high bond yields,a question exists as to the quality of the earnings being capital- ized. In 1966-71, when earnings on the Dow averaged 55, the average rate of return on net asset value was 10.5, with a definite downward trend. At the end of 1972, when the PER was 13, down from 17, the rate of return was 12; in October 1973 the PER was 10 and the rate of return was nearly 14. Nevertheless, the PER of 12 last July on earnings down to 9.5 on net assets, and, if the estimates are correct, a recent PER -'- -of l-l-on an-earnings-returwof-l0-.5-seem-to be low by recent-standards.-And a'PER-of 10-on-earnings-of–!—- 12 on book, again if estimates are correct, seems to be modest. And so, to this extent at least, the case for strength continuing beyond 1000 this time is better than, in retrospect, in the past. The ability of the Dow to approach 900 in mid-1975, the first time this has been done when earnings were in a definite recession is probably an indication of the underlying pull of value, and augurs well for higher prices if and when earnings are in an uptrend. In the past ten years, the Dow book value has gone from 453 to around 800, and price-times-book from over 2 to a little over 1. The remaining factor, interest rates, is as important as earnings quality in influencing the PER. But how to explain PER's staying at 17-1 while yields on high-grade bonds mounted from under 5 to 8 The answer probably is intellectual lag on the part of stock-minded investors (which may be operating in reverse now). It is also probable that not until 1970 was the meaning of the meteoric rise in interest rates appreciated. It doesn't lend itself to useful econometric analysis, but even if a stock multiple of 16-17 (earnings re- turn of 6) is not commensurate with long-term interest rates of 7-8, an earnings return of 10-11 is supportable in the face of a long-term rate of 9. Assuming then that stocks are modestly valued, the case for higher prices rests upon whether the in- fluences upon them are going to become more or less favorable. These influences are predominantly earn- mgs and.mterest rates. The consensus is that this year earnings will rise, maybe by 25 or more. The Significance is somewhat reduced because these represent recovery rather than an ongOing trend. A major- ity, if not a consensus, also looks for decline in interest rates. This is the more significant influence and it is not invalidated if earnings do not improve as much as estimated. Of course, unforeseen events such as war, liquidity criSiS, and pessimism about 1977 could invalidate -n-. the thesis. As-to each of these, categorical answers wouldrbe uselessi if,not worse. Of coursei-there afe always uncertainties of one kind and another; if it weren't so there would be no point in investing for capi- tal gain. If stocks are indeed relatively low m price, that offers some protection – it tilts the risk-reward ratio in favor of the holder. Thus, those circumstances that lend themselves to conventional market analysis appear more favorable than at any of the times of past assaults upon Dow 1000. Valuations are more conservative, earnings re- covery less advanced, and stocks are again competitive with bonds, the Yields on which appear to be declln- ing. It would be surprismg if the Dow, on this move at the beginning of the year should continue on through 1000 without consolidatlDn or reaction. But the case for penetration sometime this year to a new and higher area of price appears to be a strong one. Dow-Jones Industrials (1100 a.m.) 977.09 S & P Camp. (1200 p.m.) 100.91 Cumulative Index (1/29/76) 572.18 GLENELG P. CATERER, CFA AWT/jb No statement or expression of opinion or any other molter herein conta.ned IS, or .s to be deemed to be, dHeC'!ly or indirectly, on offer or the sol,c,tot,on of on offer to buy or sell ony security referred to or mentIOned The motter IS presented merely for the converlence of the subscriber While -Ne believe the SQurces of our mforma tlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any OC'!lon to be token by the subscflber should be based on hiS own investigatIon and 'nformatlon Janney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now have, or may later toke, poslhons or trades In respeC'! to any secUrities ment,oned In thiS or any future ISsue, and such pOSlhon may be different from any views now or hereafter expressed In thiS or any other Issue Janney Montgomery Scott, Inc, whICh IS registered With the SEC as on mvestment adVisor, may give adVICe to Its Investment advisory and othel customers Independently of any Iatemenh mode 1M thiS or Hl any other Issue Further information on any security mentioned herein is available on request

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