Tabell’s Market Letter – June 03, 1977
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMDEII NEW YORK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK. EXCHANGE – June 3, 1977 Readers of this letter by now are familiar with our view of the current dull stock market environment. The market continues to experience an erosion which to date has corrected the Dow- – – ..-.-; – – – – – – —– , – – – ..r- ……….. -'- –'' . approximately 11 from its September, 1976 high of 1014779. -In spite of the Dow'Jone's Inaustria-r— Average recently penetrating the 900 level reaching a cloSing low of 898.66 on Monday, it is diffi- cult for us to recognize this weakness as a precursor to a major bear market phase. Confirmed watchers of the Dow-Jones Industrial Average will immediately take issue with the above statement as clearly a downSide breakout from an important top formation has occurred. In the past, occasional reference has been made to Murphy's Law which states, If anything can go wrong, it will. More recently, atten- tion has been directed to O'Toole's Law which, Simply stated, says, Murphy was an optimist. Where could the Dow Watcher go wrong It is often maintained, as this letter has recently discussed, that the popular market averages because of a limited number of issues and weighting factors have been giv- ing a distorted picture of the stock market's true picture. The Cumulative Index, we feel, clearly underscores this. Started on May 1, 1964, this Index shows the average day-to-day percentage price change for all issues traded on the New York Stock Exchange. It, baSically, is computed by adding the daily percentage change of all stocks and dividing by the number of issues traded. We compute our Index by cumulating these percentage changes. In order to make the Index compatible to the DJIA, we used the DJIA April 30, 1964 close of 810.77 as a base. The Index, we feel, gives a reasonable proxy of the performance of the average New York Stock Exchange issue. Documenting the action of the Cumulative Index in relation to the DJIA can be a more valuable tool in formulating a forecast than merely relying on the DJIA. Utilizing a 20 filter on the Cumulative Index, the table below gives the value of the Cum- ulative Index at major market turning pOints since its inception, and the corresponding level of the Dow —..,c..-…,.,…….for. the. sa me .date,.toget!!E.'N,lth l'rclltag,Q!!an.ges4between el cIlpp)li,nt,. ——' 1- – Cumulative — -…,.-' Days Dow-Jones Date Index Change This Swing Industrials Change April 30, 1964 810.77 0.00 0 810.77 0 February, 1966 High 1095.03 35.06 452 995.15 22.7 October, 1966 Low 803.42 -26.63 164 744.32 -25.2 December,1968 High 1455.59 81.17 524 985.21 32.4 July,1970 Low 681.40 -53.19 390 669.39 -32.1 April, 1971 High 1060.13 55.58 205 950.82 42.0 November,1971 Low 827.06 -21.99 146 797.97 -16.1 March, 1972 High 1044.70 26.32 74 950.18 12.1 December,1974 Low 345.61 -66.92 703 577.60 -39.2 May, 1977 High 669.84 93.81 735 943.44 63.3 June 1, 1977 Low 649.37 – 3.06 9 906.55 – 3.9 A number of observations are apparent. It is interesting to note the number of trading days in each of the last two major swings. From the 1972 high to the 1974 low, a total of 703 days were ob- served, while the subsequent rally from the 1974 low to the recent May, 1977 high took 735 days. Hectic Wide swings in relatively short periods of time reminiscent of the late sixties-early seventies has given way to more orderly, albeit more lethargic, markets, not unlike recent months. If you accept the premise that the Cumulative Index is a proxy for the performance of the average NYSE issue, we find that in every case the Dow understates the extent of this performance. For example,the,Cumulatiye Index intheshort.period of,sixyears from its 1968 high'of-l'45559'foits – 1974 low of 345.61 has lost an incredible 76.26. In other words , we have seen a market which has seen the average stock lose three-fourths of its value over a Six-year period. The DJIA from its Dec- ember, 1968 high of 985.21 corrected to 577 .60 in December, 1974, a correction of 41.37 or approx- imately one-half that of the Cumulative Index. I n addition, from as recently as the March, 1972 high of 1044.70 on the Cumulative Index to its 1974 low of 345.62, a decline of 66.92was registered. What the Cumulative Index seemS to be saying is the speculative excesses of the late sixties has, in fact, been dramatically corrected. This excess has not been properly reflected in the DJIA. Conversely, the same is true in up swings. Since the October, 1966 low of 803.42 to the 1968 high of 1455.59, an advance of 81. 17 was registered in the Cumulative Index versus an increase of 32.4 in the Dow. More recently, the Cumulative Index, since the December, 1974 low of 345.61, advanced Significantly to the May, 1977 high of 669.84 resulting in a gain of 93.81. The DJIA for the same period has ap- preciated 63.3 from its December, 1974 low of 577.60 to a recent high in May, 1977 of 943.44. Dow-Jones Industrials (1200 p.m.) 909.01 ROBERT J. SIMPKINS, JR. S & P Composite (1200 p.m.) 97.09 DELAFIELD, HARVEY, TABELL Cum\/j1A;t;;r\ti';n or cny ma-t(Onlamed orRJS ether IS, IS to be deemed to be, directly or indirectly, on offer or the soliCitation of on offer I buy or sell any seaJflty 'ton 10 be reliable we In referred no way to or mentioned The matter IS presented merely represent or guarantee the accuracy thereof nor for of the the conver'lenCC of the subscriber stotements mude herein Any V'/llile we belIeve oct Ion to be token btyhethseo usu' ' b sscrolfbeorulrs hnf'dbou k e based on hi! own 'lnvesllgatlan and Informatlo(l Janney Montgomery posItions or trades In respect Ic any securities mentioned In thiS or any Scott, futuro tnc, 05 a 11S(le, and corporatIOn, and Its officers or such pOSitIOn may be different erflployees, may from any views now now ohra vhee,reoardf tmeraye.aprleedrsetthein, thiS or any other Issue Janney Montgomery Scolt, Inc, which IS registered With the SEC as on Investment adVisor, may gIVe adVice to ItS Investment 0 visoryon 0 er customers Independently of ony statements mode ,n Ih,s or en any other Issue Further Information on any securIty mentioned herein IS ovollable on request