Tabell’s Market Letter – April 01, 1977

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VOAK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE April 1, 1977 , 'o,Qulteoftenthe,best'te,chnill!le forth!lllsingJ'lttol1allya!out the stock market 1S to back off from it and become less concerned with its diy-to-day-vagru-ie;- Wht lecis-u's to 'th-;;-;;-omment– at this time is the fact that two weeks ago we found ourselves far removed from the market's short- term action, having spent the previous few days on the side of a Vermont mountain. There, the only ups and downs with which we found ourself concerned centered around the mechanical device which took us up said mountain and the quality of the snow which brought us back down. The ups and downs of the stock market were, by and large, out of our mind. It was probably just as well. Had we been here staring at the tape a fortnight ago, we might have felt compelled to comment on the fact that the Dow-Jones Industrial Average had just risen sharply above the trading range in which it had been contained through February and early March. We might have commented further on the fact that an apparent successful test of the lows around the mid- 920's had taken place and that the market had rallied nicely from that test. Rereading of the financial press indeed suggests that many commentators at the time were compelled to this sort of euphoria. It was a euphoria that was shortly shattered as the market, having made its new peak, spent ten of the next eleven trading sessions sinking like a stone, in the process reaching new 1977 lows for the popular averages, penetrating, in the process, the bottoms of last November. We have thus con- cluded a two-week penod in which the analyst who restricted himself to Simple-minded chart reading, found it necessary to shift from mild optimism to the depths of despair. This sort of schizophrenia is somewhat less than conducive to rational portfolio management. The first question that needs to be asked centers on whether it m1ght not be advisable to ignore the recent weakness, much as it was obviously advisable to ignore the strength of two weeks b-efore. The second–is, assuming that-the-weakness;'s.,,,-indeed,-tel-ling ,us-something ,whatisiLin- dicating as far as portfolio planning is concerned. The answer to both questions reqUlres a preface reiterating our comments of the past half-year concerning the various widely-followed market averages. There is no doubt that, if one looks at the major indices, the outlook is somewhat less than favorable. A decisive follow-through to last week's decline would leave the market w1th little in terms of projected support this side of the base from which it took off some 15 months ago. That base, tn terms of the Dow-Jones Industrials, is tn the low 800's, and comparable downSide targets can be read for other widely-followed indlCes such as the SSP 500. Yet, as we have been trying to suggest since last summer, these indices have, of late, been telhng us precious little about the true state of the market. Our Cumulative Index, for example, which we believe to be adequate proxy for the action of all New York Stock Exchange issues, now stands around 646. It is difficult at the moment to pro- ject a downside target of much worse than 620, a level which can hardly be considered disastrous While the DJIA and the SSP 500 have just completed the classic signs of a bear market tnCeptlOn — they moved below their respective 200-day moving averages in mid-February and returned preclsely to touch those averages on the recent rally before turning down again — the Cumulative Index finds itself in a preclsely opposite position. It remains sharply above its own 200-day moving average, and that average is still ris mg at an appreciable rate. The same is true, for what it is worth, of the Amex Market Value Index. What we are saying, in other words, lS that we are more mclined than we mlght other-wise be t,,beskeptical-of the pa'ttern ofthe widelyfollowedindicators.' 'That a further follow– — through to the decline would suggest fairly senouS market weakness is, we are afraid, an inescap- able conclusion. A basic concern, however, should be on the effect of that weakness on a well- structured portfolio. Based on the action of the bulk of listed issues, we are unable to envision that effect as being more than temporary. The dual point that we are trying to make 1S that the action of the averages may be mis- leadingly beansh and that, even assuming that it is not, that many issues are hkely to outperform the averages on the downs1de even as they have been outperforming them on the upside for the past nine months. We thtnk it is safe to continue to base portfolio strategy on tndividual stock patterns as they develop rather than on the current ominous actlOn of the popular indicators. Dow-Jones Industrials (1200 p.m.) 924.29 S & P CompOSite (1200 p.m.) 98.87 ANTHONYW. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (3/31/77) AWT/lb 624.31 No statement or expressIon of opInion or any other matter here,n contained IS, or IS 10 be deemed to be, dIrectly or indirectly, an offer or the sohcltahon of on oHer to buy or sell any security referred to or mentioned The matler IS presented merely for The converltmcos of the subSCriber While we believe the sources of OUr InformaIlon to be reliable, we In no woy represent or guarontee the occurocy thereof nor of the stotements mude herein Any octlOn fa be toen by the subscriber should be ool&d on 'liS own /nVCtlgotlon and Infarmatlon Janney Montgomery Scott, Inc, os a corporation, and Irs officers or employees, moy now have, or may later taj.-e, poSitions or trades In respect to any seCUrities mentioned In thiS or any future Issue, and such posJtlon may be different from any views now or hereafter exprcssed In thu or any other IsSue Jonney Montgomery Scoll, !nc, which IS regls'ered With the SEC 05 on Inveslment odvlsor. may gIVe odvlce to Its investmenT odvlsory and other CI.IstamCf Independently of ony statements mode In ThiS or In ony OTher Issue Further mfarmaloon on any security menhoned herein Is ovolloble on request