Tabell’s Market Letter – October 01, 1976

Tabell’s Market Letter – October 01, 1976

Tabell's Market Letter - October 01, 1976
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. ; ,,I, , ., – – – TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCI( EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE October 1, 1976 Guriollser and Curiouser! 11 …..,.I'–,…——–..,….. … …. Lewis Carroll —–…,.. ——….,……,..-'Alice'sKdvefituresfnWonderIana-4 .– Alice's famous phrase to describe unusual happenings comes readily to mind when ob- serving the recent behavior of the stock market. A week ago Wednesday, as we all know, the Dow, for no readily apparent reason, soared 20 pOints to attain, at 1014.79, a new 44-month high. The rise took place from a not-particularly-oversold condition and, indeed, prior to its occurrence there was little in the technical picture that would lead one to expect such behavior. The rally, however, turned out to be strictly a one-day phenomenon. Although it was extended on the morn- ing of the following day, the market then turned down and closed slightly lower. With the excep- tion of a modest advance this Monday, every day since has been a declining day, and the dynamic September 22 rally was counterbalanced by a sickening 18-point drop on Tuesday. While expressing last week our willingness to assume the validity of the upside break- out, we noted that there were a number of factors which were, at least, moderately questionable. Breadth, we noted, was subpar on the advance and it has remained abyssmal ever since. The Transportation Index, while it rose along with the Dow a fortnight ago, failed to post any sort of meaningful nevi high. LIkewise, our Cumula tive Index failed on the rally to equal either its July high or its slightly lower peak of last February. The ostensible reason for Tuesday's sudden drop was the announcement of an August decline in the NBER's composite of 12 leading indicators. This brings up another curious paradox which, undoubtedly, would have appealed to Lewis Carroll. If one examines the list of the 12 indicators which go to make up this composite, one discovers that one of them is the S & P 500 C)C k in dex . If.Qne. follo;'sh is.r.eJ'-s9ningto.itslog ica l.c onc Iusion,,the–stock ma!'ket—-de0!!ned—-,I, .. at-feast' in 'part, because the stock market declined. It is also worth noting that, in and of itself, a one-month drop in the leading-indicator composite is not, historically, a cause for weeping, wailing and gnashing of teeth as far as either the economy or the stock market is concerned. In the leading-indicator expansion between 1961 and 1966, for example, there were no fewer than nine one-month drops before the eventual peak was reached, and the 1966-68 expansion saw five. In the series most recent rise from 1970 through 1973, three one-month drops occurred, all of them, interestingly, fairly early in the cycle. We are looking, to borrow a cliche from the sportswriting profession, at a market which has been unable to put it all together. Take, for example, the matter of breadth. Our week- ly breadth index has provided a classic confirmation of the new high posted in the major averages, but our daily index has, albeit marginally, failed to do so and remains lower than it was last Feb- ruary. Yet, throughout June-July, while the Dow, at least, was doing nothing whatsoever, both breadth indices decisively penetrated their downtrends and, along with the Cumulative Index, moved up at a rate considerably better than that of the Dow. In the case of the Transportation Index, its failure to post a new high constitutes a lack of confirmation in the classic Dow theory sense and, yet, what are we to make of the fact that the carriers were soaring to new peaks last summer at a time when the Dow was stagnating What we are saying, really, is that if last week's rally was insufficient to change the atmosphere of stagnation which has enveloped the market since last spring — and this apparent- ly is the case — then this week's decline has, likewise, failed to resolve the dilemma., We are on ,- '- back-to what'is'reallytne'J)asTc 'qu e-stl wl1icn'iS'wh-ether flj'e narrow trading range of recent months constitutes a distributional top or a potential upside continuation pattern. If the former is the case, then the downside implications have, by now, assumed major proportions. The problem is as we suggested last week, there is very little, if anything, to suggest weakness of those pro- portions — moderate weakness in certain areas, yes; a broad decline, no, at least at the moment. As always, the market ultimately will tell its own story, either by extending last week's rally or exhibiting further deterioration. Until the latter event occurs, however, we think a fairly positive stance is the proper one. Dow-Jones Industrials (1200 p.m.) 986.29 S & P CompOSite (1200 p.m.) 105.35 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (9/30/76) 613.82 AWT/jb No statement or expressIon of op'nion or any other moiler herein contCllned I'. Of 1 to be deeml!!d to be, directly or indirectly, on offer or the soliCitation of on offer to b…. y or sell ony security referred to or mentioned The matter IS presented merely for Ihe convetrence of the subSCriber While oNe believe the sources of our rnforma tlon to be rehoble, we In no way represent or guarantee the accuracy thereof nor of the SlOTemenTS mudc herem Any ochon to bc token by the subSCriber hould be based on hiS own Investigation and Information Janney Montgomery Scali, Inc, as a corporaTIon, and ItS offrcers or employees, may now have, or may later Toke, positions or Trodes m respect to ony secunTles mentioned In thiS or any fuTure Issue, and such position may be different from any views now or hereofter e)'pressed In thiS or any other Issue Janney Montgomery Scali, Inc, which IS registered WITh the SEC as on Investment adVisor, may give adVice to Its Investment odvuofy and other customers Independently of any stotements mode In thiS or In any other Issue Fulther InfOrmaTion on any sccunty menTIoned herein IS available on request

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