Tabell’s Market Letter – December 03, 1976

Tabell’s Market Letter – December 03, 1976

Tabell's Market Letter - December 03, 1976
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER New' VOAK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE December 3, 1976 Technical analysiS in its simplest form has never been anything more than the analysis of a series of numbers, the numbers, in the case of this sort of analysis, being stock prices. -We exampl,,–tQhave;-manytlmes-iil-the -past used'tlle followlngslmpte- decriionstra-tethls -p-rrncipe-Take ,.. the number series 1, 2, 3,4, 5, What is the best guess as to the number represented by the questionmark Quite obviously, the answer is 6. What we have really done in making this guess is to make assumptions concerning the underlying process which produced the numbers in the first place. What we are doing in conventional technical work, as we look at stock prices, is making assumptions as to investor psychology and economic forces which are part of the underlying process of making future stock prices. Let us take a second number series, however. That series is 5, 6, 3, 1,4, What guess are we to make as to the next number. It is obviously not possible to make any rational guess at all. (Indeed, it certainly should not be, since the numbers happen to be a computer-generated random number series.) Now, there are many periods in the Course of stock market history when it is totally im- possible to look at a series of stock prices and draw a rational conclusion as to future action. The present happens to be one of those periods. This does not mean, however, that we should simply throw up our hands and await a future loud-and-clear message. The very knowledge that we possess insufficient information is, in itself, valuable, and is an aid in setting parameters by which we can judge future price action. Let us apply this to the present case. On September 21 of this year, it was possible to make one statement with absolute certainty, 1. e., that we were in a bull market which had begun on December 6, 1974, the Dow having advanced 75 to a new high on that date with no appreciable in- – – tervening correction. Given that knowledge,i! was possible to describe mathematically the state of C-affairs whlc-h existed-in the stOck- ari-tbetweEnDec-embr 6;1974a-nd Septmbr2 1976 That – . state of affairs consisted of a broad uptrend channel some 172 points wide rising at a rate of .78 pOints per day. In October, that uptrend channel was penetrated on the downSide. It Is, now, there- fore, clear that the parameters which accurately described the December, 19 74-September, 1976 period no longer describe the current situation. If they did, the Dow would today be'between 995 and 1170. Moving forward, it is likewise an ineluctable fact that, as of last November 10, we were in a minor downswing, minor because it was under 9 in the Dow and less in a number of the other averages. It was equally possible to describe that downswing mathematically by means of a trend -channel. That channel was some 64 pOints wide and was declining at the rate of just under two points per day. The channel was, in other words, a mathematical representation of the state of affairs which existed during the six-week period in question. However, a l5-day upmove ensued from November 10 to November 24 carrying the Dow from 924.04 to 956.62. That upswing decisively violated the minor downtrend channel. Had the channel not been Violated, the Dow would today be somewhere between 930 and 865. What we are saying, in other words, is that two states of affairs, which we know previously to have existed, are both inconsistent with what the stock market is doing at the moment. Still, even this lack of knowledge is helpful to us. We know, at least, what we should be looking for. One possible eventuality would be a new low below 924.04. That would reestablish a downtrend with a somewhat less steep slope and we would then be able to use this downtrend as a clue to a future rev.ersal. Ase,cond would be an extension of the.pr.esent,upswing to approximately … 5.(It hs proven less th;;n helpful in the past to try to work with trends of less than this dimension.) A 5 extension of the current advance would involve the Dow reaching approximately 970. , 970 is an important level in another sense since it, or 966 to be more precise, represents the top of a trading range that has contained the Dow since mid-September. That trading range is of SOme significance,since it is large enough to suggest a move into new high ground if heavy overhead supply, which, as we all know, exists around the 1000 level, could be penetrated. Thus, while the state of our knowledge of the future course of stock prices is at the moment highly imperfect, we have been at least able, through analysis, to establish parameters which may be worthwhile guidelines for future investment action. Dow-Jones Industrials (1200 p.m.) 949.47 S & P CompOSite (1200 p.m.) 102.46 ANTHONYW. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (1l/2/76) 617.02 AWT/jb No 'Iclement or expression of Opinion or ont' olhcr matter herein contarned IS, or IS to be deemed 10 be, dIrectly or indirectly, on offer or the sohcltatlon of an offer 10 buy or sell any security referred 10 or mentIOned The matter IS presented merely for the converlenCt of the subscriber While we believe Ihe sources of ovr information 10 be reliable, we In no way repre-en! or 9\Joranle toe occurccy thereof r.or 01' Ine '!.lolemel'\l.. mucie herel At'ly cctiOn. to be taen. by the subSCriber should be based on hiS own InvesligatlOn and lI'lformotlOn Janney Monlgamery Scolt, Inc, as a corporotlOn, and lIs officers or employees, may now have, or may Jaler tole, pOSitions or trades In respect to any CVTltles menlloned j(\ Ihls or ony future Issue, an.d such pOSition may be different from any Views now or hereafter epressed In Inls or any other Issue Janney Montgomery Scolt, Inc, which IS registered v,,,ln the SEC as an InVestment adVisor, may give ad….,ce to Its investme.,t adVISOry and olhel customers Independently of any slotemenls made In thiS or In any other Issue Further information on ony security mentioned herein IS ovallob!e on request

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