Tabell’s Market Letter – January 14, 1977

Tabell’s Market Letter – January 14, 1977

Tabell's Market Letter - January 14, 1977
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON NEW JERSEY 08S40 DIVISION OF MEMBER New VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGe – january 14, 1977 The past two weeks of stock market action can be. characterized by two adjectives, surprising ,.,;..andconfusing .. –…. -v-.w— L..,– — – -T-'-''''''''' The element of surprise stems from the known reliabllity of the year-end rally as a seasonal pattern. It stems, also, from the relatively short memory of most investors, whose most vivid memories are of most recent stock market history, I.e., 1976 and 1975. In both years, it will be recalled, the market took off like a skyrocket at some point in December and continued upward into january and February after which it spent most of the latter part of the year dOing absolutely nothing whatsoever. Clearly, the formula for success in those two years was to be long stocks as the year began, for it was in the first quarter that the bulk of upside action was concentrated. Apparently in expectation of the same sort of thing, investors spent the entire month of December, 1976, bidding up stock prices. Thus, the surprise when the market immediately turned down as the new year began. The confuSing aspect of the market arises from the fact that the major averages, as we tried to suggest last week, are, at the moment, giving a highly distorted picture of what is really going on in the marketplace. The Dow, which moved to a closing low of 968.25 on Wednesday before rallying sharply in Thursday's trading, was on a closing basis, then 36 pOints below its December 31 high. Yet, whlle all this was going on, no fewer than 461, or more than one of every five issues listed on the New York Stock Exchange, managed to post new 1976-77 highs in the week ended january 7th. On january 12th, the day the Dow achieved its low, 44 issues were, nonetheless, able to post new one-year peaks. Almost uniformly, all major indices of market breadth and vitality continue to show positive action. In market environment such,as this one, those who love to create reasons for stock market behavior have a field day. Since it was agreed almost universally by the experts that the market was supposed to go up in the first two weeks of january, there must, so the reasoning apparently goes, be underlying factors which were not taken into account to explain why the market moved in the opposite direction. thus, two ';;-idely-cIted reasons'Ior the'market's-ffio,hng-,ioi;t last week were'i)ai'fse' in-tne wl'lol-eSaIe–'-h-.,,-, price index and 2) disappOinting earnings on the part of one of the Dow components, International Paper. As usual, we remain unimpressed by reasons of this nature. It is only necessary to look at the record to see that we have had plenty of good markets in the past in the face of rises in wholesale prices and, whlle disappointing earnings may well account for International Paper's moving down, we fall to see why this should apply to the general market, especially since, by and large, fourth quarter projections remain reasonably good. The accession of a new President, especially one such as Mr. Carter whose intentions remain somewhat enigmatic, provides a fertlle environment for the professional creators of reasons. It can be sagaciously explained, a) that the market went up because Mr. Carter's economic programs were going to stimulate the economy or, b) that it went down because the very same programs were inflationary, depending, of course, on which direction the market takes. We have no doubt that the spring of 1977 will constitute a period in which each and every move on the part of the new Administration is seized upon as a reason why the stock market is doing whatever it is, at the moment, doing. As technicians, we continue to prefer to ignore the so-called reasons for market action and allow the market to tell its own story. It is, to date, at least, despite a still rather mlld downswing in the popular averages, indicating robust good health. Quite obviously, the weakness of the first two weeks of 1977 could be the start of some sort of market deterioration. There is, however, absolutely no indication at this point that such is the case, Meanwhlle, as far as downside targets are concerned, most logical objectives center around the 960-950 area in terms of the Dow. This area was touched on an intraday basis on Wednesday,but we would not be surprised by asl1ght fuftherpenetration. Thts area'colncldes-with'fairly-strong support from'the – I October-November base. Of course, since a decline bottoming out in the 960-950 area would appear the most plausible action, there is always the possibility that the market will again do something surprising, something in the vein of the false downside breakout of last September or the non-existent january rally of the past two weeks, Such a surprise could easlly take the form of a downswing which, temporarlly at least, moved lower than expected. Absent more convincing evidence of market deterioration than has yet been seen, however, we would counsel against being panicked by such an eventuallty. Dow-jones Industrials (1200 p.m.) S & P CompOSite (1200 p.m.) Cumulative Index (1/13/77) AWT/jb 972.07 103.89 662.95 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No ltotement or expreSSion of OPiniOn or any other mOiler herein contained IS, or IS to be deemed 10 be, directly or indirectly, an offer or the solicltallon of an offer to buy or sell any eunly referr 10 or mentioned The motter IS presented merely for Ihe conVef'lenCE of the subSCriber While we believe the sources of our Information to be reliable, we In no way represent or guorontee the accuracy Ihereof nor of the statements mude herein 1ny action to be toen by the subSCrIber should be based on hiS own Investigation and Information Jonney Montgomery Scol1, Inc, OS a corporation, and Its offlcer& or employees, may now hove, or ma\, later toke, P011tlons or trades 111 re1pect to any seCurities mentioned 111 thiS or any future ,ssue, and such pOSitIOn may be different from any views now or hereafter e)rpressed 111 thiS or any other Issue Janney Montgomery Scott, Inc, whICh IS registered With the SEC as on Investment adVisor, may give adVice to Its ,vestment adVisory o'ld other cusomers IIldependently of any statements mode, thiS or 111 any other Issue Further Informallon on any security mentioned herein IS available on request

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