Tabell’s Market Letter – November 03, 1978
View Text Version (OCR)
– -. —–,——– TABELL'S MARKET LETTER ———– — 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCI( eXCHANGe. INC MEMBER AMERICAN STOCK eXCHANGE – – – -. . –.- – —,.. – – – – November 3, 1978 …. .– We attempted last week to preach a sermon on the virtues of not becoming panicked by the short term gyrations of the market while, at the same time, trying to pay heed to whatever message was being conveyed by those gyrations. This week's action made the first part of the admonition even more difficult at the same time that the message, however jumbled, was becoming more insistent. Monday featured an almost-classic selling climax which totally failed to follow through in Tuesday's trading as a 17-point decline to 792.45 took place in what may come to be known as the Halloween Horror Story. Then on Wednesday, ostensibly due to President Carter's plans to strengthen the dollar, cilme a 35-point rally which petered out and was partially retraced in Thursday and early Friday trading. For volatility, at least, it was quite a week. It is worth the risk of boring the reader by citing a few figures in an attempt to put the whole thing into historical persepctive. Wednesday's advance was heralded by many who should know better as the largest in history, which, of course, it was only if one has not yet learned to compute percentages. In terms of percentage advance, 4.46 , ranks 73rd on the all-time list of one-day advances, although, it must be admitted, in the post-World War II period, it has been approached only by advances occuring near the bottoms inOctober,1957, May, 1962, May, 1970, and October, 1974. Much has also been made of the steepness of the decline which, over 14 trading days, took the Dow down just over 12. This again is a phenomenon that has occured no fewer than 53 times in the past, although again very rarely since 1946, and, in most cases, associated with upside reversals. In one sense, it should duly be noted,the decline did set a record. It was, by at least one measurement, the broadest decline in stock market history of the past 52 years, exceeding, in – -breadth-terms,- a nything-that-took-place-during-the4-9 29-3 2,period-and-S-Uf-ja set at the October bottom in 1937 and at the fall of France in May, 1940. The measurement which exceeded these previous periods is the familiar 10-day advance-decline oscillator which, on October 27th, reached a record oversold condition at -9382. To make this figure comparable historically, it must be adjusted for the number of issues traded,but even when this adjustment is made the con- dition of last Friday outranks all previous short-term oversold conditions by a considerable margin. It is , ih sum, an undeniable fact that the sort of condition that the market had reached late last week and early this week was a rare bird indeed for the post-World-War-II period. It is possible to go even further and state that that condition, when achieved in the past 30 years, has been almost universally associated with major market bottoms. Climax lows are not always the actual lows in the averages, and, indeed, they may be followed by new lows often quite some time later. Such climactic troughs, however, have usually tended to pinpoint what may be thought of as the effective bottom. Having said all this, we are compelled to raise a more-than-moderately disquieting pOint. It all took place at the wrong time. The textbook climax action of last week occured, not after a major downswing, but very close to a market top scored just last September. This, and the fact cannot be ignored, is totally without precedent for the last 30 years. As we suggested above, to find the sort of action which featured last week occuring on a repeated basis, one has to go back to the 1930's. In those highly volatile markets wide short-term swings were the order of the day. market environment similar to that of 40-50 years ago. What we are suggesting, however, is that the market, via the suddeness and viciousness of the recent decline, is clearly trying to send us -. some sort-of .message. -Decoding,that message will.be-the major task of. market analys-is in -the- – weeks ahead. Dow-Jones Industrials (1200 p.m.) S&P Composite (1200 p.m.) Cumulative Index(1l/2/78) 819.04 95.76 677.84 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWTrak No !clement or e)(preS5lon of opinion or any otner moiler herein contained IS, or IS 10 be deemed to be, directly or ,ndlrectly, on offer or Ihe 501lcllollon of an offer to buy or sell any security refered 10 or mentioned tlon 10 be reliable we In no way represent or guaronlee the accuracy Ihereof nor at the s;olemenls mude herein Any octlon to be to en y t e su sconfbeoru1rSt ou t k dbased on hiS own' Inves'lgallon ond mformotlon Janney Montgomery Scol!, Inc, os 0 corporation, and Its officers or employees, moy now have, or may a er e, pOSitiOns or trodes In to any seCUrities mentioned In thiS or any future Issue, and such position may be different from ony views now or hereoJter e)(prcdse thin thiS or any other Issue Janney Montgomery Scolt, Inc, whICh IS registered With Ihe SEC as on II'Ivestment adVisor, may give adVice to Its a yuory, on a el customers Independently of any statements mode In thiS or In any other Issue Further information on any security mentioned herem IS avol a e on rllques