Tabell’s Market Letter – December 29, 1978

r' —–.- -,. —, – -……., ,I 1 ITABELL'S , I Ii MARKET II, LETTER j l -1 !)eIojUd, !TaUI 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIYISION OF fiIlN/!. jimlyomcY ktt Yhc. MEMBER NEW VORK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGe December 29', 1978' ,- — -, For a decade or more now, each year's last issue of this letter has been devoted to the year-end rally. That rally had been, until recently, a Jimorrenon of unusual reliability, a December advance, however miniscule, never having failed to carry into January from 1897 through 1976. The past two years have provided the only exceptions. The 1977-78 bear market began from a high on the last day of December, 1976, and last year the market reached its December peak on the first day of the year, plunging almost 100 pOints before bottoming in February. Despite this recent action, however, a number of facets of the year-end action are still worth noting. 1. The year-end rally often has been of great magnitude with advances as great as 28 having been recorded. It also, on occaSion, has continued with only minor interruptions for as long as six months into the new year. However, on other occasions, it has been of only a few days' duration, reaching a top extremely early. Thus, in 1960, 1970 and 1973, the rally reached a peak by the first week in January, and, as noted above, the 1976 and 1977 year-end rallies failed entirely to carry into January. In 1961, 1964, 1967, 1971, 1975 and 1976, the rally continued into February or March. 2. There has been a persistent tendency for the rally to begin early in years when the market has been up, and late in years when the market has been down. In recent upward years, 1963, 1967 and 1975 are examples, the rally commenced from early December. In recent downward years, 1962, 1966, 1969, and 1977, the rally began late in the year. The probable start date this year, essentially a flat one, is December 18th. – -37''The'important-thing'to watch'in connectiun-with'th'e-market a'ction-in-th'e'early'months 'ofthe new year is the low for the previous December. This low has been broken in forty-seven years out of the past seventy-eight. However, in twenty-eight of these forty-seven cases, it was broken in January and February. Since 1937, it has never been broken later than midMarch, with the exception of 1965 and 1974. Thus, if the market is able to hold above its December low for the first 2 1/2 months of the year, chances become good that this low will not be broken. For example, in 1970, 1973, 1977, and 1978, the December low was broken by early January. 1978 was unusual since, although the December low was broken early, the market turned upward in March. 4. In years when the December low has been broken, the subsequent trend has been downward two-thirds of the time. 1962, 1966, 1969, 1973, 1974 and 1977 are typical cases. 1965 and 1978 were exceptions. 1970, of course, was a down year in the first half. 5. The magnitude of the rally is an important clue as to the year's market trend. For example, an advance of 10 or more from the December low has been followed by an upward or neutral market in thrlty-three of the thirty-nine years that such an advance has occurred. An advance of less than 10 or more from the December low before an identifiable correction takes place has been followed by a downward market in twenty-six of thirty-nine years. In 1963, 1964, and 1971, the year -end rally approximated 10, and in 1972, it was 17. In 1962, 1970, 1973 and 1977, for example, it was less than this figure. 6. The length of time in which the rally continues into the new year also is Important. For example, in twenty -one years, the rally continued into March or later. In eighteen of these twenty-one years, the eventual trend was upward.,-In1964, 1972,.-1975, and 1976, the year-end rally continued into March and In 1961, 1967, and 1971 into February. This year, therefore, the December 18th closing low of 787.51 becomes an important reference point to watch. If the Dow is able to advance from this low by 10, roughly to about 866, or continue a rally into February or March, the implications would be bullish. Dow-Jones Industrials (1200 p. m.) S&P Composite (1200 p.m.) Cumulative Index (12/28/78) 806.65 96.34 668.57 ANTHONY W TABELL DELAFIELD, HARVEY, TABELL AWTrak No statement or expression of opInion or ony other maHer hf!rCln contolned IS, or 1510 be deemed 10 be, directly or ,ndlrectly, on offer or the soliCitation of on offer to buy or sell ony security rO!!!ferred to Or men honed The moiler Is presented merely for the corwellence of the subsl;rlber Whde we believe the sources of our Informa- han to be rel,oble, we In no way represent or guarontee tht! accuracy thereof nor of the statements mude herein Any action to be token by the subscriber shOuld be based on Ius own Invustlgatlon and informallon Janney Montgomtlry ,5.;011, Inc, 0 a COrpOration, and or employees, may now hove, or mo,!, later toe, positions or trades In resPect to any sccurrtlcs mentioned Ifl thiS or ony future Issue, and such positron may be different from any views now or hereafter expressed In thiS or any other Issue Janney Montgomery 5coll, Inc, which IS registered With the SEC as on Investment adVisor, may give adVice to Its Investment adVisory and athe, customers Independently of any statemenTS mode In thiS or Ifl ony other Issue Further Informal Ion on any security mentioned herein IS avadoble,on request