Tabell’s Market Letter – October 06, 1978

TABELL'S MARKET LETTER 909 STATE ROAD. PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK eXCHANGe, INC MEMBER AMERICAN STOCK eXCHANGE – October 6, 1978 -Readers, of financiaL theiLchoice. of.v.arioull, materigl.V'!ith whtch. to bore themselves. In the case of the bulk of stock market -he'-investor has hacCoi the opportunity to become bored with abstruse observations about such phenomena as the money sup- ply, the discount rate, the,Mid-East situation, foreign exchange markets and other such items that supposedly have some relevance for what the stock market might do. This being a technical market letter, we generally choose to lull our readers to sleep in another fashion, the recitation of boring series of numbers. It is our belief, of course, that these numbers have at least as much relevance to the equity markets as some of the factors discussed above. Herewith, in any case, some statistics. Last month, on September 7th, the Dow closed at 907.74. This was 22.3 above its prior major low which occurred on the last day of February this year. This places the current stock market in the company of six prior stock-market periods in the past 30 years, these periods being defined by the occurance of an advance of greater than '20 with no intervening drop of any significance. These occurances, it will be recalled, are known in the vernacular as bull markets. More recently, the Dow has moved off from its September 7th high having closed at 875.16 on September 20th, a drop of 5.57. This is the second drop of greater than 5 since the advance be- gan, the previous one having been a 7.01 decline between Tune 6th and Tuly 5th. We thus have, at the moment, a 20 advance which has been interrupted to date by two declines by 5 or greater. It, therefore, becomes relevant to ask how many declines of 5 or more occurred in the six previous upswings before the advances finally ran their course and gave way to major drops. The table below cites the statistics Jan. 1946-Jan. 1953 Sept.1953-Ju1y 1957 Oct. 1957-Dec. 1961 DOWNSWINGS 5 OR 'MORE 6 Oct. 1966-Dec.' 1968 8 May 1970-Jan. 1973 5 Dec. 1974-Dec. 1976 4 5 7 As can be seen, no previous advance has reached a bull-market high without being interrupted by at least four drops of 5 or greater, and there have, as in 1953-1957, been as many as eight. On an historical basis, therefore, the present interruption in the upswing would appear to be a perfectly normal phenomenon and could, indeed, continue further and deeper without eliciting any great concern. Looked at in another way, it is now 18 trading days since the Dow last posted a new high for the advance. How many times in the past have advances been interrupted by periods of similar magnitude, say 15 trading days or longer, during which time they failed to make new highs Presented below is a table of the count Jan. 1946-Jan. 1953 Sept.1953-Ju1y 1957 Oct. 1957-Dec. 1961 PERIODS Of LONGER THAN 15 DAYS WITHOUT BULL MARKE HIGH 11 Oct. , 966-Dec. , 968 ' 6 May 1970-Jan. 1973 14 Dec. 1974-Dec. 1976 7 8 7 In contrast to the above, it can be noted that the present interruption is only the third since the advances began in February. It is furthermore relatively short compared with the interruptions of past bull markets, the bulk of which have tended to be from 20-40 days long. Indeed, it is worth noting that, in all of the upswings defined above, there has been at least one interruption which .– lasted close ,- -,—,—,- – —,. The above statistics may have indeed been boring, and we apologize therefore. Some comfort may be found, however, in that they do not seem to suggest any reason to worry about the stock market based on September's action. – …. Dow-Tones Industrials (1200 p.m.) S&P Composite (1200 p.m.) Cumulative Index (10/5/78) 879.50 103.59 795.57 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or expreulon of opinion or any other matler herein contolned is, or IS to be deemed 10 be, directly or ,ndlrectly, on offer or Ihe solicitation of on oHer to buy or sell any security referred 10 or mentioned The motter IS presented merely for the conver'lence of the subSCriber While .,e believe the sources of our Informa lion 10 be rellble, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein, Any action to be token by the subSCriber should be based on hrs own IIlveslrgolion and IIlformatlon Janney Montgomery Scott, Inc, as a corporatron, and rts offrcers 01 employees, may now have, or may later toke, posilions or trades III respect to any securrtles mcnhoned In thiS 01 any future Issue, and such posrlton may be drfferent from any views now or hereafter expressed In thiS or any other Issue Janney Montgomery 011, Inc, which IS regl5lered With the SEC as on Iflvestmenl advrsor, may gIVe adVice to Its rnvestment adVISOry and othel customers mdependently of any statements made III thiS or In any other Issue Further Information on any security mentioned herein IS ovarlable on request