Tabell’s Market Letter – September 17, 1976

Tabell’s Market Letter – September 17, 1976

Tabell's Market Letter - September 17, 1976
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—— —- ————cc——————————c—– TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW VOl'll( STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE September 17, 1976 One of the reasons that technical analysis w1l1 always have certain aspects of an a t erath eLtha n.a. S cienc e,isdha Lthebehavior,coftechnica I.indica tors .verycLoften.tends.tocha ng e I over time. One market characteristic that has distinctly altered its behavior in recent years is the action of volume as related to stock market tops. It has long been our practice to study upside volume (volume on days where the market advances) separately, and we smooth the curve of the statistic by taking a 25-week moving total of the figure. From the 1920's to early 1960's, a fairly consistent pattern emerged. Upside volume generally declined dramatically during market downswings but, almost invariably, this decline began well before the market reached its peak and was largely underway at the time of the market's high. Upside volume was, thus, a leading indicator, extremely helpful in the advance recognition of market tops. The following table shows the date, the Dow, and the upside volume total in mlllions of shares for various bear markets in the past, showing each at the time of the peak of upside volume, the time of the peak in the Dow and the time of the Dow's ultimate low. As can clearly be seen, through 1961, upside volume tended to peak out as much as a year before the Dow did so and well before the Dow reached its high. Upside Volume Peak DJIA Peak – DJIA Low Date DTIA Up Vol Date Up Vol Date DTIA Up Vol Feb. 2, 1929 319 307 Sep. 7, 1929 381 235 Jun. 4, 1932 45 74 Mar. 7, 1936 157 181 Mar. 13, 1937 194 156 Apr. 2, 1938 107 66 Feb. 21, 1946 204 – 135 May 31, 1946 212 107 Nov. 30, 1946 165 69 Apr. 29, 1955 430 260 Apr. 6, 1956 521 167 Oct. 25, \957 423 115 Ma r..l 3 1 96J4..,..,2 9.7 .Tan.8,,,,,l9JiD 16B5–169 Dct .2K,19 60,5J.2,,,,…..LH 4 May 26, 1961 702 375 Dec. 29, 1961 731 – '226 Jun. 29, 1962 '536 – 188 Feb. 11, 1966 995 578 Feb. 11, 1966 995 578 Oct. 14, 1966 754 335 Sep. 20, 1968 924 891 Dec. 13, 1968 981 785 May 29, 1970 641 539 May 26, 1972 971 1326 Tan. 12, 1973 1051 1080 Dec. 13, 1974 579 762 As the lower half of the table shows, however, this behavior changed dramatically starting with the 1966 bear market. In 1966 upside volume peaked in the same week as the Dow and declined coincidentally with the market's fall. There was a slight lead in 1968, but not enough for forecasting purposes, and the action in 1972 was ambiguous. Upside volume began to decline in May, seven months before the market peak but then bottomed out and began to rally in the late fall. What is perhaps interesting at the moment is the action of upside volume over the past two years. Between July 11, 1975 and January 2, 1976, upside volume dropped almost 50 from 1676 million shares to 892 million shares. During the latter half of 1975, it will be recalled, the market remained essentially flat. The same phenomenon seems to be repeating itself today. During the agonizing trading range which has characterized 1976 since February, upside volume peaked at 1750 million shares on June 25th and has 'declined so far to 1183 million shares. Various interpretations may be placed on this phenomenon, but one of the more plausible runs as follows. It has been demonstrated that, since 1966, at least, a decline in up- slde volume iiqllt..witll.,C!rrectio–ill!ry.P12sJ'. Sllchdeclins.,toQ.!;, place,during .bea rmar,, ' -kets, but one also took place in late 1975. We now know, since the market advanced sharply in early 1976, that late 1975 was, in fact, a correctionary phase and that the coincident upside- volume decline fitted the normal post-1966 pattern. It certainly is conceivable that the similar action of upside volume at the moment is telling us that the present trading range is, likewise, serving as a correction to the early 1976 advance and that the ultimate resolution will be another upward leg in the bull market. Dow-Jones Industrials (1200 p.m.) S & P Composite (1200 p.m.) Cumulative Index (9/16/76) AWT/jb 992.35 105.70 614.14 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or expression of opinion or any olher moIler herein contolned 1, or Is to be deemed to be, directly or Indirectly, on offer or the solicltotlOn of on offer to buy or sell any S8CIJrlty referred to or mentioned The motter IS presented merely for the converlenCG of the subSCriber While …..e believe the !.Curces of our mforma1101'1 to be reliable, we In no way -represent or guarantee the accuracy thereof nor of the statements mude herein Any actmn to be token by the subscriber should be based on hiS o …..n Inveshgotlon cnd ,nformat,on Jonney Montgomery Scott, Inc, as a corporeflen, and Its officers or employees, may now have, or may Icter toke, POSitions or trades ,n respect to any Secufltles mentioned m thiS or eny future Issue, al'ld such posltmn moy be different from ony views now or hereofter epressed In ttHS or any other Issue Jonney Montgomery Scott, Inc, which IS registered With the SEC os on Investment odvlsor, may give adVice to Its Investment adVISOry end othel customers ,ndependently of any statements mede In this or In ony other Issue Further Ihforrnellon on any security mentioned herem IS available on request

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