Tabell’s Market Letter – July 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 — …. –July …. r-,.0- …. –,.- 4. ..–..- –Y – ………. -r l;;l-977—'—-..;,;- -F-r Independence Day eve is an appropriate time for our traditional examination of the widely- heralded summer rally. Herewith, then, that examination with the usual cautionary notes. Ending Month January February March April May June July August September October November December Total ONE-MONTH PERIODS Advances Declines Avg. Chg. 34 17 1. 24 28 23 0.04 28 23 -0.08 28 23 0.93 26 25 -0.81 25 26 0.93 33 18 1.90 33 18 1.47 22 29 -1.36 28 23 -0.24 29 22 0.40 38 E 1.37 352 260 0.48 TWO-MONTH PERIODS Advances Declines Avq. Chg. 34 17 2.58 29 22 1. 28 25 26 -0.14 31 20 0.93 30 21 0.35 25 26 0.08 32 19 2.78 35 16 3.53 30 21 0.07 25 26 -1. 56 31 20 0.20 ..1! E 361 251 1.80 0.99 The table above shows the action of the Dow-Jones Industrial Average in every one-month and two-month period from 1926 to 1976. For each period the number of instances when the market ad- –..-.vanced-and-declinedis-shown,together-with-the average'PercentageChange;for–theper-i)d.-A-pre- '….,;'- liminary look at the table, indeed, supports the notion of a probable summer rally. The average monthly advance for the Dow over the period has been .48, whereas the average performance in July is an advance of 1.90, almost four times as great. Likewise, the average advance of 3.53 for the two months ended August is a good deal larger than the average two-month advance. It would, Indeed, appear that the expectation of an advancing market during July and August has some solid grounding in fact. Having made this statement, however, a few doubts must be raised. The first factor which needs to be pOinted out is that a large part of the high average advance for the summer period rests on the accident of the 1932 bottom's having occurred at the end of June. Thus, July and August of that year produced the largest two-month advance In stock-market history, an astounding 70 rise. If this single year is eliminated from consideration, the results for July and August are much closer to normal. Secondly while it Is true that July and August do show significant pluralities of advancing months over declining months, It must be remembered that advancing periods tend to outnumber declin- Ing ones over the 51 years by almost three to two. When standard tests of statistical Significance are applied, the period with the clearest seasonal action Is the month of December, wblch is why this letter has always emphasized the Importance of the year-end rally. Likewise, the tendency, toward a declining market in September Is statistically more significant than that of a rise in July or August. Interestingly enough, none of the other months show any discernible seasonal pattern what- soever. Lastly, in looking for seasonal patterns, it Is wise to examine the most recent data to see-If it seems to be deviat-lng from-the past,and'ilndeed'i thisis apparently the-Gase–T-he,eleven – – -'- 'C-t years between 1966 and 1976 have produced three rallies and eight declines in July and five rallies and six declines In August, and the two-month period ended August has produced four rallies and seven declines with an average percentage change of -1.63. Interestingly enough, a new seasonal tendency, not heretofore apparent, seems to be emerging — that of a decline In May-June. Every May, from 1965 through 1977, with the exception of 1972 and 1975, has produced a declining market, and twelve of the thirteen years since 1965 have shown a two-month drop in May-June. The moral of the whole exercise, we suppose, Is that the stock market is a difficult and changing beast, and, while certain seasonal tendencies are apparent, they constitute only one factor In what is Invariably a highly complex equation. Dow-Jones Industrials (1200 p.m.) 910.96 ANTHONYW. TABELL So. P CompOSite (1200 p.m.) 100.06 DELAFIELD, HARVEY, TABELL Cumulative Index (6/30/77) 681.22 AWT/lb No talement or e)(preS510n of opinIOn or cny other matter herem contained 1S, or IS 10 be deemed to be, dlrediy or indirectly, on offer or the SoilCllotlon of an oHer to buy or sell any security referred to or mentioned The matter I presented merely for the canver'lencc of the subscriber While He believe the sources of our Information to be reliable, we m no way represent or guarantee the accuracy thereof nor of the statements mode herein Any action to be token by the subSCriber should be based on hiS own mvesl1gatlon and information Janney Montgomery Scott, Inc, as a corporation, and lIS officers or employees, may now have, or may later lake, positions or trades 10 respect to any seCUnlles mentioned 10 thiS or any future ,ssue, and such poslhon may be different from any views now or hereafter e)'pressed '1'1 thiS or any other Issue Janney Montgomery Scali, Inc, whld! 15 registered WIth the SEC as on Invcstment adVisor, may 9,ve advlf;e to Its Investment adVIsory and other customers mdependently of ony statements mode In thiS or In any other Issue forther information on ony seC\Jflfy menTIoned herein IS available on request