Tabell’s Market Letter – June 30, 1978

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE june 30, 1978 – –r The measured by the Industrial Average appears to again be approaching anmterestiilg juncture' andIts worlliwa'tClllng 'cioselY;ToTe\fCew, 'slnce-the-Dj1Ahlgh of 1014.79 on September 21,1976, the market has corrected Itself 26.87 over 496 trading days, reaching a low on February 28, 1978, as the DjIA closed at 742.12. From the February low the 'Dow then rallied significantly to a high on june 6, 1978, of 866.51 or 16.76 In 84 trading days. 'Most recently the Dow has corrected from its high of 866.51 on june 6,1978, to a low on june 26,1978, of 812.28 or 6.26. What prompts this statistical exercise on the Dow Is to draw attention to the potential slgnlflcance of the rally from the February low. Utilizing a simple filter, listed below are selngs of greater than 25 down and 15 up on the Dow jones Industrial Average Since the post war. DATE DJIA CHANGE It OF DAYS 12/13/61 6/26/62 2/ 9/66 10/ 7/66 12/ 3/68 5/26/70 1/11/73 10/ 4/74. 9/21/76 2/28/78 6/ 6/78 734.91 535.76 995.15 744.32 985.21 631.16 1051. 70 584.56 1014.79 742.12 866.51 0.00 -27.10 85.75 -25.21 32.36 -35.94 66.63 -44.42 73.60 -26.87 16.76 0 134 913 167 518 367 665 437 496 362 68 years an average correction of 31.9 lasting in duration an average of 293 trading days. Prior to this date there had not been a 25 correction in the Dow for approximately twenty years. The other observation which can be noted Is the behavior of the DjIA after each of these corrections, excluding the most recent advance. By no means meant to be predictive, It is Interesting to ob- serve that the average percentage increase in the Dow and the average duration of the subsequent move following these declines are 64.6 and 648 days respectively, conSiderably above the most recent advance. The action of the Dow In relation to its computed trend channel, an attempt to quantify trend mathematically, can also be instructive. On this basis, two downtrend channels have recently contained the D)lA, the first starting In the December 31, 1976, high of 1004.65, and the second computed from the more recent November 11, 1977, high. These two downtrend channels are plotted on the chart on the back page. The most slgnlflcant channel. of course, Is the one covering all of 1977-78 signified by the solid lines on the chart. As the chart shows, the market has rallied to the top of this channel on five separate occasions. Likewise It has touched the bottom of the channel numerous times, and In each case, a significant rally has occurred. The same thing is essentially true of the shorter- term channel extending back to last November. As can been seen, at the end of February the Dow once again touched the bottom of the channel and from that point commenced a rally. For the first time In theprocess of that rally the Dow moved above both downtrend channels decisively, setting up conditions for a test of the IS-month old major downtrend. As the chart shows, the reversal unquestionably penetrated the upper limits of these channels. Indeed, we now have a new computed uptrend establlshed as shown on the right hand side of the chart. This trend rising for 1 84 .tradlng.-days …at…. approximately;cl -;90.,…polnts .. per ..day.. has …also, … been' penetrated. — What conclusions can be properly drawn from this action Simply, the distinct environment which has statistically characterized the market from january, 1977, through March, 1978, Is no longer in effect. The fifteen month long-term major downtrend has been arrested and new Invest- ment policies must evolve. St!ll the remaining question dividing the investment community is whether the rally since February Is merely a rally within a bear market and w!ll penetrate the old lows or Is in fact, as we believe, the start of a new bull market ultimately indicating higher levels. The most recent minor correction has placed the market in Its sharpest oversold position since August, 1975, as measured by our 10-day advance/decl!ne osc!llator. The behavior of the market as It recovers from this oversold condition may help answer the questionJat,.ed ..!',ndas stated..Ja.rller should be watched closely. ROBERT j. SIMPKINS, JR. Dow-jones Industrials (1200 p.m.) 819.99 Delafield, Harvey, Tabell S & P Composite (1200 p.m.) 95.37 Cumulative Index (6/29/78) 729.89 RjSrak – ,-, … -. ..- No statement or expression of opinion or any other malter herem contolned IS, or IS to be deemed to be, directly or indirectly. on offer or the oll(llollon of on offer to buy or sell any secuflly referred to or mentioned The motter IS presented merely for the of .he subSCrtber While we believe the sources of our mformo lion 10 be rellcble, we In no way represent or guarantee the accuracy theteof nor of the stotements mode herem Any action to be by the subSCriber should be based on hIS own mVestlgallOn and mformotlon Janney Montgomery Seoll, Inc, as a corporal,,m, and lIs officers or employees, may now have, or may later toke. POSitions or trades In respect to any securities menlloned In Ihls or any future Issue, and such position may be different from ony views now or hereafter expressed In thiS or any other Issue Janney Montgomery Scott, In whlh IS registered With the SEC as on Investment adVisor, moy give adVice to ,Is Investment advisory and other customers Independently of any state'l1ent mode In Ihls or In any other Issue Further Informahon on any secullty mentioned herem IS available on request -' I -30 – 1962 \ 11963 11964 10 DRY NET DlFFERENCE OF RDV.-DEC. RS PERCENTRGE OF TOT. lSSUES TRRDED I I'! i I Ii I I\1 I I II I II 'I \ /1 Hn r I !II . \ I) I I ;! II 11965 11966 1967 P RY nrl n 000 10Arii 11968 1969 1970 197 1972 11973 1974 111975 1976 1977 1978