Tabell’s Market Letter – October 21, 1977

Tabell’s Market Letter – October 21, 1977

Tabell's Market Letter - October 21, 1977
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TABELL'S MARKET LETTER 909 STATE RO…. D, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YOAK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – October 21, 1977 Thomas Wolfe wrote a novel called You Can't Go Home Again, and the proscription – -embodied in that—title-has-a,paralleLfor,investors ,towjt—ygucanLlradg,at.y.!l.te-,clays ,!lrices, or at last month's or last year's prices either. . .- ,- , The maxim is worth recalling at a time like the present. In all too many cases, in- vestors are prone to remember the recent price history of stocks which they own and to allow that price history to influence their decision as to what ought to be done with the security in question at the moment. In the current instance, when prices have lately been falling fairly sharply, many security-holders will recall the fact that, a few months ago or a year ago, they could have sold stocks at higher prices and will allow this factor to color their decision as to whether or not to sell today. Like W. S. Gilbert's Flowers that Bloom in the Spring, this has nothing to do with the case. If probabilities favor the market heading lower by a sufficient amount, then stocks should be sold at today's prices regardless of where they may have been over the past year. By contrast, if stocks are attractively priced at current levels, they should be bought, and fears en- gendered by the fact that the market has been trending downward for nine months should be ignored. The above bromide is easy to expound in market letters but difficult to follow in practice. It is further complicated at the moment by the fact that individual investors' percep- tions of reality will vary depending on which sector of the marketplace their present portfolio most closely resembles. The Dow-Jones Industrials are now down 20 from their highs of September, 1976, the lowest level, as the newspapers are fond of pointing out, in over 24 months. Thus, if an investor's portfolio performance has recently resembled that of the Dow, he has watched his capital erode for the past 13 months and is poorer, theoretically, than' he has been at any time —durin'g the past two years. The DoW, however, — we reiterate theIact once again — -,Silot the onlysegment- – of'the market. We have referred to our Cumulative Index, which, we believe, is a fair measure of the action of all NYSE issues. In contrast to the Dow, it reached a new peak as recently as July 22, three short months ago. Since that time, it has declined along with all the other market indicators, but it is off by only 8.1 from its high and sold for its current price as recently as April and May. Quite obviously, perception of recent market history is going to be colored by which index more closely represents portfolio performance. A portfolio down 20 to a two-year low is likely to engender quite different feelings than one which has moved 8 off its high over 90 days and is stUl, roughly, within the confines of a six-month trading range. And, yet, as we noted above, It should all not make the slightest Iota of difference. The question — Indeed, the only question — concerns whether a strong probability exists that well-chosen equities will, in the future, trade Significantly below their prices at this precise point In time, October 21, 1977. Despite the dismal short-range behavior of the market, which has not improved any since we discussed It at some length last week, there are reasons to suggest that such is not the case. A glass can be either half-empty or half-full, and, while the fact that the Dow is already down 20 is not, as we noted, a circumstance calculated to generate wild enthusiasm, it does suggest that a fairly substantial degree of correction has already taken place. The fact that 20 has been a sufficient threshold to define major bear markets prior to 1970 should at least give one pause. It is arguable, of course, that in the current case the Dow has merely led the rest ' ….. – of themarket and, that 'eventually,the bulk of -stoeks .. represented' by the Cumulative -Index , wlll' ;- play follow-the-Ieader into the abyss. The above-average technical action which characterized the broad-based Indicators up until July Is, unfortunately, no longer a fact of market life. Yet, it must be noted that analysiS of individual patterns does not support this likelihood either. In all too many cas es, downs Ide obj ectlves of previously-formed tops are being reached and support levels are being attained. We are inclined to think, based on analysis of the present rather than on looking at the past, that precipitous sales of equities would, at this stage, be unwise. Dow-Jones Industrials (1130 a.m.) S & P Composite (1100 a. m.) Cumulative Index (10/20/77) AWT/jb 808.99 92.38 636.96 ANTHONYW. TABELL DELAFIELD, HARVEY, TABELL No statement or expression of op'nion or any other matter herein contolned Is, or IS to be deemed to be, directly or indirectly, an offer or the lollcllollon of on offer to buy or sell any ecvnty referred 10 or mentioned The molter IS presented merely for the conve,ence of the subSCriber Wh,le Ne belreve the sources of our Informo f,on fO be rei, able, we m no way represent or guarantee the accuracy thereof nor of the statements mude herem Any aC1lon to be faken by the subSCriber should be based on hiS own Investigation and ,nfOrmaIIO., Janney Montgomery Scott, Inc, as a corporation, and 115 officers or employees, may now have, or may lofer toke, poslhons or trades in respect to any secur,IIes menlloned In thIS or any future ISSUe, and such POSition may be different from any views now or hereafter e)(presed In thiS or any other Issue Janney Montgomery Scott, Inc, wnlch IS reglslered With the SEC as on Investment adVisor, may give adVice 10 115 Investment adVisory and oThe. customers Independently of any statements made ,n thiS or In any other Issue Further Information on any seo.Jrlly menlloned herem IS available on request

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