Viewing Month: May 1978

Tabell’s Market Letter – May 05, 1978

Tabell’s Market Letter – May 05, 1978

Tabell's Market Letter - May 05, 1978
View Text Version (OCR)

r — — —— 1—- I lI ————————–, TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY OB540 DIVISION OF MEMBER NEW YORK STOCK eXCHANoe, INC MEM8ER AMERICAN STOCK EXCHANGE May 5, 1978 — -'- Some two began thIs 'letter with tile -c'OlniffEint.-SCllnethmgstartecfhapleniJfgthl8'—- week., and included a chart outlining the two computed downtrends which, to that point, had contained the D1A for fifteen months. The process which began that week has, of course, continued wlth a Yen,. gance, as the chart below, brought up-to-date, demonstrates. COMPUTED TREND ANALYSIS – DJIA 'lin' 3, 1978 — rUl 1m !Ill. 1978 A!'t! .178 IfIT 1m As shown above, the market, at mld-March, had remained within the confines of two downtrend channels, one golng back to the beginning of January, 1977, the other, wlthin the confines of the larger channel, starting in November, 1977, and running through February, 1978. The lateral action of late March and early April dlstlnctly violated the narrower channel and set up condltions for a test of the fifteen-month old major downtrend. As the chart shows, the volume reversal which began three weeks ago has now unquestionably penetrated the upper limit of that channel. Indeed, we now have a new computed uptrend in effect as shown on the rlght hand side of the chart. That trend ls, at the moment, rising at approxlmately two points per day. It ls probably worth relterating just what inference may properly be drawn from this action. The fifteen-month long major downtrend slmply quantifles the fact that, from January, 1977 through March, 1978,.a.distinct was in effectan envlronment that, regardless of.mlnorfluctua-.- tions was -taking the !Sow down by some. 70 points per day. It ls demonstrable that recent action ls inconslstent wlth that sort of envlronment, and lt may thus be concluded that that envlronment ls no longer ln effect. By extentlon, investment policles based on such an environment are no longer appropriate. The exact shape of the current environment, now only 46 trading days old, is difficult to determine and wlll probably be redefined as time goes on. Wha t we do know, however,ls that the stock-market climate of 1977 and early 1978, one to which we had long become accustomed, can no longer be sald to be a characteristic of the current financlal scene. Dow-Jones Industrlals (1200 p.m.) 832.29 ANTHONY W. TABELL S & P Composlte (1200 p.m.) 96.77 DELAFIELD, HARVEY, TABELL Cumulative lndex (5/4/78) 726.11 AWTrak No statement or expreUlon of opinion or any other motler herem contained IS, or IS 10 be deemed 10 be, directly or indirectly, an offer or the SolICitatIOn of on offer to buy or sell ony secuHly referred to or mentioned The molter IS presened merely for the converlenceo of the subscriber While we believe the Ources of our Informa tion to be relloble, we In no woy represent or guarantee the accurocy thereof nor of the statements mude herein Any aCTIOn to be by the subSCriber shOUld be based on hiS own investigation and 'nformation Janney Montgomery Scott, Inc, as a corparatlon, ond 115 officers or employees, may now have, or may later tale, poslhons or trades In respeCT 10 any securities menhoned In thiS or any future ISSUe, ond such pOSition may be different from any views now or hereafter epressed In or any other Issue Jonney Montgomery Seoll, Inc, which IS registered With the SEC as on Investment adVisor, moy give adVice to lis Investment odvlsory and other C\.Istomers Independently of any statements made In thiS or In any other Issue Further ,nformotlon on cny securety mentioned herein IS avolloble on request

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Tabell’s Market Letter – May 05, 1978

Tabell’s Market Letter – May 05, 1978

Tabell's Market Letter - May 05, 1978
View Text Version (OCR)

r — — —— 1—- I lI ————————–, TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY OB540 DIVISION OF MEMBER NEW YORK STOCK eXCHANoe, INC MEM8ER AMERICAN STOCK EXCHANGE May 5, 1978 — -'- Some two began thIs 'letter with tile -c'OlniffEint.-SCllnethmgstartecfhapleniJfgthl8'—- week., and included a chart outlining the two computed downtrends which, to that point, had contained the D1A for fifteen months. The process which began that week has, of course, continued wlth a Yen,. gance, as the chart below, brought up-to-date, demonstrates. COMPUTED TREND ANALYSIS – DJIA 'lin' 3, 1978 — rUl 1m !Ill. 1978 A!'t! .178 IfIT 1m As shown above, the market, at mld-March, had remained within the confines of two downtrend channels, one golng back to the beginning of January, 1977, the other, wlthin the confines of the larger channel, starting in November, 1977, and running through February, 1978. The lateral action of late March and early April dlstlnctly violated the narrower channel and set up condltions for a test of the fifteen-month old major downtrend. As the chart shows, the volume reversal which began three weeks ago has now unquestionably penetrated the upper limit of that channel. Indeed, we now have a new computed uptrend in effect as shown on the rlght hand side of the chart. That trend ls, at the moment, rising at approxlmately two points per day. It ls probably worth relterating just what inference may properly be drawn from this action. The fifteen-month long major downtrend slmply quantifles the fact that, from January, 1977 through March, 1978,.a.distinct was in effectan envlronment that, regardless of.mlnorfluctua-.- tions was -taking the !Sow down by some. 70 points per day. It ls demonstrable that recent action ls inconslstent wlth that sort of envlronment, and lt may thus be concluded that that envlronment ls no longer ln effect. By extentlon, investment policles based on such an environment are no longer appropriate. The exact shape of the current environment, now only 46 trading days old, is difficult to determine and wlll probably be redefined as time goes on. Wha t we do know, however,ls that the stock-market climate of 1977 and early 1978, one to which we had long become accustomed, can no longer be sald to be a characteristic of the current financlal scene. Dow-Jones Industrlals (1200 p.m.) 832.29 ANTHONY W. TABELL S & P Composlte (1200 p.m.) 96.77 DELAFIELD, HARVEY, TABELL Cumulative lndex (5/4/78) 726.11 AWTrak No statement or expreUlon of opinion or any other motler herem contained IS, or IS 10 be deemed 10 be, directly or indirectly, an offer or the SolICitatIOn of on offer to buy or sell ony secuHly referred to or mentioned The molter IS presened merely for the converlenceo of the subscriber While we believe the Ources of our Informa tion to be relloble, we In no woy represent or guarantee the accurocy thereof nor of the statements mude herein Any aCTIOn to be by the subSCriber shOUld be based on hiS own investigation and 'nformation Janney Montgomery Scott, Inc, as a corparatlon, ond 115 officers or employees, may now have, or may later tale, poslhons or trades In respeCT 10 any securities menhoned In thiS or any future ISSUe, ond such pOSition may be different from any views now or hereafter epressed In or any other Issue Jonney Montgomery Seoll, Inc, which IS registered With the SEC as on Investment adVisor, moy give adVice to lis Investment odvlsory and other C\.Istomers Independently of any statements made In thiS or In any other Issue Further ,nformotlon on cny securety mentioned herein IS avolloble on request

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Tabell’s Market Letter – May 12, 1978

Tabell’s Market Letter – May 12, 1978

Tabell's Market Letter - May 12, 1978
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TABELL'S MARKET LETTER '———– 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEM8ER NEW YORI( STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE May 12, 1978 -'— been inalCaUng–m tifi,r's1aci for a aM-'a'half;-enlr'Of 'frustrating -a-s-pects'of — recent market action is that it provides us with almost nothing in the way of historical precedent upon which to base investment policy. Through February 28 at least, we had been in what, on the surface, appeared to be a bear market of perfectly conventional stripe. The Dow was down 26 over a period of 14 months and the S & P by a similar If somewhat lesser amount. In terms of length and amplitude, the declines in both Indices were precisely within the framework of what market'historians are accustomed to call major bear markets. The trouble was, as we all know, that this so-called bear market was confined almost exclusively to the popular averages. Unweighted, broader-based !ndices, in which the influence of secondary stocks was greater, were moving ahead to new highs throughout the first half of the downswlng,and were essen- tially moving sideways during the second half. Recently, such indicators have moved to new peaks without ever, over the 16-month period, having undergone anything noticeable In the way of correction. As we noted above, this Is unprecedented. The usual timetable In these cases Is for secondary stocks to top out and move sideways well before the averages. In due course, first-tier issues tum down and begin to follow their junior brethren into lower territory. As the bear market gets under way, secondary issues usually lead on the downSide, scoring greater percentage declines than the higher grade compon- ents of the averages. Finally, as the market bottoms, ,It Is generally quality issues that enjoy a sharp rebound well before much action takes place on the secondary !ssues. There have been variations on the above scenario but none so striking as the recent one. For hlgh- grade issues to have undergone a full-scale bear market,while secondaries not only falled to decline but moved ahead rather sharply,ls without parallel In recent market memory. It Is hardly surprising, therefore, that there should exist conflicting interpretations of the phenomenon. It Is perfectly , -PlaUSible, .in otherwords that-theLb,ear,market –;,..f- over before secondary stocks join In. The optimist, on the other hand, since the whole thing Is without precedent anyway, can adapt the view that first-tier stocks, having gone down all by themselves, can just as easily bottom by themselves and join the booming secondaries on the upside. Herein, of course, lies the dilemma, and it Is a dilemma that remains totally unresolved by recent frenetic upside action. The peSSimist stoutly maintains that, with no secondary correction, the current action can be nothing more than a rally In a bear market. The optimist can see It as part of a bottoming out process In the beleagured high-quality Issues. We tend to place ourselves In the optimistic camp. The trouble with the gloomy scenario, In our view, Is that, If it were a correct Interpretation of the facts, certain things should now be happening. These phenomena, however, are, at the moment, notable for their complete absence from the market scene and, Indeed, for the most part, precisely the oppOSite of what the pessimist would expect seems to be taking place. It would be normal, under the gloomy view, to expect, with recent upside action having shifted to first-tier Issues, that secondary stocks should tum laggard. Precisely the opposite has been the case. There have, In the past three weeks, among the 1500 stocks we follow on an Individual basis, been no fewer than 170 upside breakouts of either major or minor proportions, the bulk of those having taken place In secondary Issues. Since we have been keeping the figures at least, this number Is a record for any three-week period. Meanwhile, our Cumulative Index continues to soar to deciSive new bull-market heights. In the upper tier, one would expect those Issues that had participated In the bear market to have re- mained short of dow'nside targets. Again, precisely the oppOSite has been the case. Basic-Industry Issues, at least, had reached major support levels by early this year. Their action since that time has cliaracterlzed off that support and i;tOtally conslstant 1Vlth the-earlY ,-, stages of bas!ng action. As far as the other bear-market leaders, the heavlly capitalized growth stocks, are concerned,the bulk of these stocks, although admltt,edly not all, have adequately tested their 1974 lows, a level which, under conventional technical theory, should fully correct their overextension of the late 1960's and early 1970's. Action In these Issues also has been cons!stent with an early base-formation process. There may be factors, economic and otherwise, present at the moment which suggest an ongoing bear market. We suspect these factors have been widely noted and have by now attained the status of con- ventional wisdom. It must be stressed, however, that the scenario of continued decline Is one which is, at present, emphatically not supported by analysis of the action of individual stocks In the marketplace. Dow-Jones Industrials (1200 p. m.) 840.78 ANTHONY W. TABELL S & P CompOSite (1200 p.m.) 98.00 DELAFIELD, HARVEY, TABELL Cumulative Index (5/11/78) 738.81 AWTrak No statement or expreSSion of opinion or cny olher malter here'n contolned IS, or 15 to be deemed to be, dlretlly or Indirectly, on offer or the sol'Cltollon of on offer 10 buy or sell any secunty referred 10 or mentioned The motter 15 presented merely for Ihe (Qnverlence of the subscr,ber. While we believe the sources of o\Jr informa- tion to bl') relloble, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any oct Ion to be laken by the subSCriber should be bosed on hl own investigation and Information Janney Montgomery Sco, Inc, as 0 corporation, and 115 officers or e'Tlployees, may now hove, or may later toke. pOSitions or trades In respect to ony 5elJrltle mentioned In thIS or ony future Issue, ond such posItIon may be dIfferent from any vIews now or hereafter In thIS or any other ISsue Jonney Montgomery Seolf, Inc, whIch IS regIstered WIth the SEC as on Inve!otment adVIsor, may gIve adVICe to Its Investment adVISOry and other customers Independently of any statements mode In thIS or In any other Issue Further Informotlon on any security mentIoned herein IS available on request

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Tabell’s Market Letter – May 12, 1978

Tabell’s Market Letter – May 12, 1978

Tabell's Market Letter - May 12, 1978
View Text Version (OCR)

TABELL'S MARKET LETTER '———– 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEM8ER NEW YORI( STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE May 12, 1978 -'— been inalCaUng–m tifi,r's1aci for a aM-'a'half;-enlr'Of 'frustrating -a-s-pects'of — recent market action is that it provides us with almost nothing in the way of historical precedent upon which to base investment policy. Through February 28 at least, we had been in what, on the surface, appeared to be a bear market of perfectly conventional stripe. The Dow was down 26 over a period of 14 months and the S & P by a similar If somewhat lesser amount. In terms of length and amplitude, the declines in both Indices were precisely within the framework of what market'historians are accustomed to call major bear markets. The trouble was, as we all know, that this so-called bear market was confined almost exclusively to the popular averages. Unweighted, broader-based !ndices, in which the influence of secondary stocks was greater, were moving ahead to new highs throughout the first half of the downswlng,and were essen- tially moving sideways during the second half. Recently, such indicators have moved to new peaks without ever, over the 16-month period, having undergone anything noticeable In the way of correction. As we noted above, this Is unprecedented. The usual timetable In these cases Is for secondary stocks to top out and move sideways well before the averages. In due course, first-tier issues tum down and begin to follow their junior brethren into lower territory. As the bear market gets under way, secondary issues usually lead on the downSide, scoring greater percentage declines than the higher grade compon- ents of the averages. Finally, as the market bottoms, ,It Is generally quality issues that enjoy a sharp rebound well before much action takes place on the secondary !ssues. There have been variations on the above scenario but none so striking as the recent one. For hlgh- grade issues to have undergone a full-scale bear market,while secondaries not only falled to decline but moved ahead rather sharply,ls without parallel In recent market memory. It Is hardly surprising, therefore, that there should exist conflicting interpretations of the phenomenon. It Is perfectly , -PlaUSible, .in otherwords that-theLb,ear,market –;,..f- over before secondary stocks join In. The optimist, on the other hand, since the whole thing Is without precedent anyway, can adapt the view that first-tier stocks, having gone down all by themselves, can just as easily bottom by themselves and join the booming secondaries on the upside. Herein, of course, lies the dilemma, and it Is a dilemma that remains totally unresolved by recent frenetic upside action. The peSSimist stoutly maintains that, with no secondary correction, the current action can be nothing more than a rally In a bear market. The optimist can see It as part of a bottoming out process In the beleagured high-quality Issues. We tend to place ourselves In the optimistic camp. The trouble with the gloomy scenario, In our view, Is that, If it were a correct Interpretation of the facts, certain things should now be happening. These phenomena, however, are, at the moment, notable for their complete absence from the market scene and, Indeed, for the most part, precisely the oppOSite of what the pessimist would expect seems to be taking place. It would be normal, under the gloomy view, to expect, with recent upside action having shifted to first-tier Issues, that secondary stocks should tum laggard. Precisely the opposite has been the case. There have, In the past three weeks, among the 1500 stocks we follow on an Individual basis, been no fewer than 170 upside breakouts of either major or minor proportions, the bulk of those having taken place In secondary Issues. Since we have been keeping the figures at least, this number Is a record for any three-week period. Meanwhile, our Cumulative Index continues to soar to deciSive new bull-market heights. In the upper tier, one would expect those Issues that had participated In the bear market to have re- mained short of dow'nside targets. Again, precisely the oppOSite has been the case. Basic-Industry Issues, at least, had reached major support levels by early this year. Their action since that time has cliaracterlzed off that support and i;tOtally conslstant 1Vlth the-earlY ,-, stages of bas!ng action. As far as the other bear-market leaders, the heavlly capitalized growth stocks, are concerned,the bulk of these stocks, although admltt,edly not all, have adequately tested their 1974 lows, a level which, under conventional technical theory, should fully correct their overextension of the late 1960's and early 1970's. Action In these Issues also has been cons!stent with an early base-formation process. There may be factors, economic and otherwise, present at the moment which suggest an ongoing bear market. We suspect these factors have been widely noted and have by now attained the status of con- ventional wisdom. It must be stressed, however, that the scenario of continued decline Is one which is, at present, emphatically not supported by analysis of the action of individual stocks In the marketplace. Dow-Jones Industrials (1200 p. m.) 840.78 ANTHONY W. TABELL S & P CompOSite (1200 p.m.) 98.00 DELAFIELD, HARVEY, TABELL Cumulative Index (5/11/78) 738.81 AWTrak No statement or expreSSion of opinion or cny olher malter here'n contolned IS, or 15 to be deemed to be, dlretlly or Indirectly, on offer or the sol'Cltollon of on offer 10 buy or sell any secunty referred 10 or mentioned The motter 15 presented merely for Ihe (Qnverlence of the subscr,ber. While we believe the sources of o\Jr informa- tion to bl') relloble, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any oct Ion to be laken by the subSCriber should be bosed on hl own investigation and Information Janney Montgomery Sco, Inc, as 0 corporation, and 115 officers or e'Tlployees, may now hove, or may later toke. pOSitions or trades In respect to ony 5elJrltle mentioned In thIS or ony future Issue, ond such posItIon may be dIfferent from any vIews now or hereafter In thIS or any other ISsue Jonney Montgomery Seolf, Inc, whIch IS regIstered WIth the SEC as on Inve!otment adVIsor, may gIve adVICe to Its Investment adVISOry and other customers Independently of any statements mode In thIS or In any other Issue Further Informotlon on any security mentIoned herein IS available on request

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Tabell’s Market Letter – May 19, 1978

Tabell’s Market Letter – May 19, 1978

Tabell's Market Letter - May 19, 1978
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TABELL'S MARKET LETTER -, .– 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK eXCHANoe,lNC MEMBER AMERICAN STOCI( eXCHANGE May 19, 1978 It is probably not amiss, since this is a technical market letter, to begin a discussion ccof the recent'ma'rketexcitement'by defining-once'more the proper-subject'matter for analysis. Technical analysis is, to put it quite simply, the study of past stock-price data. Visualize, if you will, the continuous stream of reported transactions flowing each day across the consolidated ticker. It is the sum of these transactions, taken as individual items of information, that constitute the sole raw material for the technical process. The task of the technician is to manipulate this material. It ,may be reorganized, sep3- .-rated, collated, charted, graphed, averaged, smoothed, compared,' added, subtracted, multiplied and divided in infinite permutations and combinations of ways. Technical analys is, however, remains defined by its Input, which Is stock price action. Which leads us, of course, to a definition of what technical analysis Is not. It is not the analysis of Gross National Product, business cycles, inflation, receSSion, money supply, or interest rates. A technician may consider these Items, and, since they are quantitative in nature and quantitative work Is Indeed his stock in trade, he may use them, from time to time, In comparison with stock-price series. Such analysis, however, remains, in the purest sense, extrinsic to technical work. None of the above is meant to suggest that these various non-technical inputs are not a proper subject of study or that that study is not useful in the investment decision-making pocess. The portfolio manager would hardly be doing his job were he not to consider variables -, thissort and to utilize appropriate condusions deri;e;rfromthat cOnsMerauon in the COJrse of his work. The pOint is, though, that these inputs are sep3rate from technical analysis, not a part of it. We raise this subject at the moment simply because we are increasingly aware of some skepticism regarding the recent rally in the stock market. A good deal of that skepticism is, as far as we can gather, based on conclusions drawn from some of the factors mentioned above. As noted, we do not intend to belittle the value of these conclusions and, if they suggest pessimism at the moment, so be it. However, it should be made perfectly clear that the story being told by technical analysis is, at the moment, being writ plain. It is that the market is going up and, moreover, is likely to continue doing so. Now this rather clear indication may be at variance with conclus ions drawn from other facets of portfolio strategy work, and we Cdnnot help it. If, however, technical analysis has any validity and, after 25 years of practicing it, we think it does, it should perhaps stimulate the investment decision-maker to reexamine SOme of those conclusions. For what a study of the market is clearly telling us is that the negatives of interest rates, money supply and infla- tion are not so much an indicator of what the market is likely to do as an explanation of why it was down almost 300 pOints in the 18 months ended last February. The market is either telling us that, or it is telling us that the current conventional wisdom regarding recession, mflation ,andmterest rates,' is;quite simply .. mistaken. – ,0 ''''' – – – – – – – It has always been our view that economic-monetary analys is was valuable in stock market terms, but we have always felt it limited in the sense that investor reaction to these factors was a variable rather than a constant. We have long held, in summary, that the only way to get at the elusive variable of mvestor confidence was to observe the action of the investor in the marketplace via the simply-defined sort of technical analysiS referred to above. It is the technician's job, in other words, to gauge the health of the equity market. The con- clusion which must be drawn regarding that health at the moment is Simple. It could not be better, thank you. Dow-Jones Industrials (1200 p.m.) S&P CompOSite (1200 p.m.) 851. 61 98.52 ANTHONY W TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (5/18/78) 743.23 AWTjt No statement Qf expressIon of opinIon or cny other matter herein contolned IS, or IS 10 be dee'Tled 10 be, directly or mdorectly, on oHer or the SOllCIIolion of on offer to buy or 1ell any security referred to or mentioned The mOiler 1 presented merely for the of the subscriber While -ne believe the sources of our Informo- tlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herem Any action to be taken by the subSCriber should be based on hiS awn investigation and information Janney Montgomery Sco1t, Inc, as a corporation, and Its officers or employees, may now have, or may laler toke, positrons or trades 10 respect to any leCuntles mentioned In thiS or any fulure Issue, and such poslhon may be different from anv views now or hereafter expressed In Ihls or any other Issue. Janney Montgomery Scott, Inc, which IS registered With the SEC os on westment adVisor, may give adVice 10 115 ,vestment adVisory and other cvstomen Independently of any sotements mode In thiS or In any othe' Issue Further ,formatIOn on any security menhoned herein IS aVailable on request

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Tabell’s Market Letter – May 19, 1978

Tabell’s Market Letter – May 19, 1978

Tabell's Market Letter - May 19, 1978
View Text Version (OCR)

TABELL'S MARKET LETTER -, .– 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK eXCHANoe,lNC MEMBER AMERICAN STOCI( eXCHANGE May 19, 1978 It is probably not amiss, since this is a technical market letter, to begin a discussion ccof the recent'ma'rketexcitement'by defining-once'more the proper-subject'matter for analysis. Technical analysis is, to put it quite simply, the study of past stock-price data. Visualize, if you will, the continuous stream of reported transactions flowing each day across the consolidated ticker. It is the sum of these transactions, taken as individual items of information, that constitute the sole raw material for the technical process. The task of the technician is to manipulate this material. It ,may be reorganized, sep3- .-rated, collated, charted, graphed, averaged, smoothed, compared,' added, subtracted, multiplied and divided in infinite permutations and combinations of ways. Technical analys is, however, remains defined by its Input, which Is stock price action. Which leads us, of course, to a definition of what technical analysis Is not. It is not the analysis of Gross National Product, business cycles, inflation, receSSion, money supply, or interest rates. A technician may consider these Items, and, since they are quantitative in nature and quantitative work Is Indeed his stock in trade, he may use them, from time to time, In comparison with stock-price series. Such analysis, however, remains, in the purest sense, extrinsic to technical work. None of the above is meant to suggest that these various non-technical inputs are not a proper subject of study or that that study is not useful in the investment decision-making pocess. The portfolio manager would hardly be doing his job were he not to consider variables -, thissort and to utilize appropriate condusions deri;e;rfromthat cOnsMerauon in the COJrse of his work. The pOint is, though, that these inputs are sep3rate from technical analysis, not a part of it. We raise this subject at the moment simply because we are increasingly aware of some skepticism regarding the recent rally in the stock market. A good deal of that skepticism is, as far as we can gather, based on conclusions drawn from some of the factors mentioned above. As noted, we do not intend to belittle the value of these conclusions and, if they suggest pessimism at the moment, so be it. However, it should be made perfectly clear that the story being told by technical analysis is, at the moment, being writ plain. It is that the market is going up and, moreover, is likely to continue doing so. Now this rather clear indication may be at variance with conclus ions drawn from other facets of portfolio strategy work, and we Cdnnot help it. If, however, technical analysis has any validity and, after 25 years of practicing it, we think it does, it should perhaps stimulate the investment decision-maker to reexamine SOme of those conclusions. For what a study of the market is clearly telling us is that the negatives of interest rates, money supply and infla- tion are not so much an indicator of what the market is likely to do as an explanation of why it was down almost 300 pOints in the 18 months ended last February. The market is either telling us that, or it is telling us that the current conventional wisdom regarding recession, mflation ,andmterest rates,' is;quite simply .. mistaken. – ,0 ''''' – – – – – – – It has always been our view that economic-monetary analys is was valuable in stock market terms, but we have always felt it limited in the sense that investor reaction to these factors was a variable rather than a constant. We have long held, in summary, that the only way to get at the elusive variable of mvestor confidence was to observe the action of the investor in the marketplace via the simply-defined sort of technical analysiS referred to above. It is the technician's job, in other words, to gauge the health of the equity market. The con- clusion which must be drawn regarding that health at the moment is Simple. It could not be better, thank you. Dow-Jones Industrials (1200 p.m.) S&P CompOSite (1200 p.m.) 851. 61 98.52 ANTHONY W TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (5/18/78) 743.23 AWTjt No statement Qf expressIon of opinIon or cny other matter herein contolned IS, or IS 10 be dee'Tled 10 be, directly or mdorectly, on oHer or the SOllCIIolion of on offer to buy or 1ell any security referred to or mentioned The mOiler 1 presented merely for the of the subscriber While -ne believe the sources of our Informo- tlon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herem Any action to be taken by the subSCriber should be based on hiS awn investigation and information Janney Montgomery Sco1t, Inc, as a corporation, and Its officers or employees, may now have, or may laler toke, positrons or trades 10 respect to any leCuntles mentioned In thiS or any fulure Issue, and such poslhon may be different from anv views now or hereafter expressed In Ihls or any other Issue. Janney Montgomery Scott, Inc, which IS registered With the SEC os on westment adVisor, may give adVice 10 115 ,vestment adVisory and other cvstomen Independently of any sotements mode In thiS or In any othe' Issue Further ,formatIOn on any security menhoned herein IS aVailable on request

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Tabell’s Market Letter – May 26, 1978

Tabell’s Market Letter – May 26, 1978

Tabell's Market Letter - May 26, 1978
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VOAK STOCI( EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE – May 26, 1978 – Since the latter partoLMarhc,.this letter.has been attempting to comment aspects of –'-, improving market action as they have become evident in, day-to-day activity. We noted on March 23 that the short-term downtrend channel started in November had been penetrated, suggested on April 7 that the continuing upside leadership by secondary stocks remained unabated, and noted on April 14 that the possibility of a bottom of some importance occuring in the spring of 1978 was not incompatible with our interpretation of long-term cycle theory. With the upside gap on record volume of mid-April, improving market action became far too obvious to simply ignore. We have tried to suggest, since that time, the fact that the rally which began on April 14 seemed to be of more than passing importance and that the evidence seemed to suggest that it was far more than a simple interruption in an ongoing bear market. It is perhaps worth while at this stage to attempt to become a bit more specific regarding our perception of the current probabilities for stock market action. We have already in past letters, we hope, taken note of the most salient fact, that evidence suggests to us that we currently have on our hands something a good deal more significant than a bear- market rally. If such were the case, appropriate investment policy would have been the maintenance of cash reserves, ignoring the market strength, or indeed, utilizing that strength to build reserves which had not previously existed. Since we believe that the action of the past month in fact possesses inter- mediate-to-longer-term upside significance, we have counseled against this sort of policy and suggested that an aggressive attitude toward equities be maintained. This we continue to do. As far as upside targets are concerned, we think the data relevant to a forecast can be found in the action of the Dow since early November of last year. From that time to the end of 1977, the average held in, roughly, the 800-845 range. Early 1978 saw a sharp drop to a February 28 low below 750 and 'range that'range'onLthe,upside- – and was followed by trading in early May at the 820-840 level. That range was, in tum, penetrated on the upside prior to the retreat of the past few days. If the six months of trading action discussed above is to be viewed as a base, a view which we now consider logical, an upside target in the 940-970 range appears plausible. This area is, of course, an all-too-logical stopping place, constituting, as it does, the level at which the Dow traded through- out most of 1976 and, more importantly, the ceiling around the 1,000 level which has placed an effective damper on upside action for more than a decade. A similar upside target for the Dow Transportation Index would be around 250, approximately equal to its mid-1977 high. In terms of our Cumulative Index, the most logical projection appears to be 920, a level COinciding with the overhead supply from its 1971-73 top. This is a move of approximately 25, more than we are able to foresee for the Dow, thus suggesting continued leadership on the part of the broad range of NYSE issues versus those contained in the averages. Attempting to time a move of this nature is of course hazardous at best, but it seems to us that two rough scenarios are possible. The first scenario would be an ongoing upside move with little in the way of interim correction, certainly none much greater than the modest downswing of the past few days. We confess we are inclined toward this view on the basis of the rather unique circumstances surrounding the current stock market scene. Insufficient attention, it seems to us, is being paid to one of the most basic of all stock market commandments, i.e., Don't fight the tape. The stock market has a way of 0,embarrassing those who engage in such an unequal contest, and this embarrassment would be accomplished by continuation the rally for another 100 pOints or so without much interruption. As we suggested a month ago, however, an alternate scenario is possible and, indeed, solely in historlcalterms; more likely; -Past volume reversals (and we think the last two weeks of – April fall into this category) have often been followed by a test, on lower volume, of the previous lows. Were such a test to occur, the long-range implications might become even more bullish, since it would have the effect of broadening the base pattern, As far as this possibility is concerned the key level to watch on the Dow would be 820. Downside penetration of this figure would suggest the possibility of something more than very-short-term weakness. In summary, although the exact shape of the pattern may be unclear, we think the evidence favors the upside with continued leadership by secondary stocks, and we would advise portfolio managers to adjust in order to take advantage of this prospect, DOW-Jones Industrials (1200 p.m.) 831 51 S&P Composite (1200 p.m.) 96.58 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL Cumulative Index (5/25/78) 733 93 AWTrak No stotement or expression of opinion or any other matfer herein contolned IS, or IS to be deemed to be, directly or indirectly, an offer or the sollcllollon of on offer 10 buy or sell any security referred 10 or mentioned The moiler Is presented merely for the corwerlenCfi of the subscriber While we believe the sources of our informa- tion to be reliable, we In no way represent or guorontee the occurocy thereof nor of the Slotement mvde herem Any action to be token by the subSCriber hould be bosed on hiS own Ilweshgofion and Information Janney Montgomery Scott, Inc, os a corporation, and lIS officers or employees, moy now have, or may later toke, pOSitions or trades m respect to ony secuntles mentioned m thiS or any future Issue, and such position may be different from any views now or hereafter expressed m thiS or any other ISlue. Janney Montgomery Seoll, Inc, which IS registered With the SEC 0 on mvestment adVisor, may give adVice to liS IIlvestment and other customers Independently of ony statements mode rn thll or In any other Further mformatlon on ony S(!o.Hlty mentIOned herem IS available on request

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