Tabell’s Market Letter – February 16, 1979

TABELL'S MARKET LETTER 909 STATE ROAD. PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VORl( STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – February 16, 1979 We discussed in some detail three weeks ago some of the problems posed in looking at a market which-has behaved' like.the'one of the past'five months' -i'ecentfy asSepteinber-; It -will-be -re-' called, that the major averages posted new 1978 highs, having spent the better part of the year moving ahead. Since that time, of course, those highs have not been exceeded, but the subsequent lows on major indicators, chalked up at various points last fall, have not been exceeded either. Market-letter writers have a delightful habit of describing trading action in accordance with their own preconceived interpretations of the facts. We ourselves, inclined toward the feeling that the Sept- ember high may ultimately be bettered, began to describe the market in January as resuming an ongoing uptrend. Our more pessimistic colleagues, on the other hand, perhaps a bit confounded by January's strength, gleefully noted the weakness of the first week in February with comments stating that a major downtrend had in fact reasserted itself, implying that it was only a matter of time before the lows of last fall were exceeded. Market analysis being somewhat less than an exact science, there will be no way of proclaiming with certainty which view is correct until either decisive new highs or lows are achieved. It is perhaps worthwhile trying to look at the behavior of the market over the past five months in a bit more detail, which we attempt to do in the' following table. It shows some recent benchmark points for three widely-followed market indicators, the Dow-Jones Industrial Average, S &P 500, and the Ameri- can Stock Exchange Index, plus our daily breadth index, based on advances and declines, and our Cum- ulative Index, based on percentage changes of all NYSE-listed issues. The benchmarks shown are the September high, the October 31st low, the mid-November and December lows, the January high, and the lows of a week ago. DJIA S&P AMEX BREADTH CUMULATIVE September High 907.74 106. 99 176. 87 853.78 830.54 October 31st Low 792.45 93.15 136.75 805.17 656.07 -785. 26, '''' 92 ..49 . 138.98 .. ' 801..96 647 . Mid-December Low — 787.51 93.48 145.68 802.06 658.98 January High 859.75 101. 73 162.35 819.60 729.30 February 7th Low 816.01 97.16 156.99 811. 46 703.45 The five indicators shown have exhibited consistent behavior in many respects. All of them posted highs in mid-September at levels significantly above present prices. They all declined to the end of October in the late, unlamented Halloween Massacre. Subsequently, two lows in the same general vicinity were posted. The one in mid-November was generally the lowest of the three except in the case of the American Stock Exchange which posted three successively higher peaks during the period. All three in- dicators recovered sharply, to the end of January and then backed off, reaching lows on February 7th, from which level they have since rallied. The February low, to date, has held well above October-Dec- ember figures. One activity of the market analyst in an uncertain environment should be an attempt to assess the market's internal vitality. In this task, analysis of the above table is of some assistance. A few conclu- sions are perhaps worth noting. One interesting facet, prevailing in the face of widespread commentary on the demise of leadership by secondary issues, is the surprising action of the Amex Index. It was the only one of the five indica- tors to post a series of higher lows last fall, and its January advance was the strongest, carying it far closer to its September high than was the case with any of the other averages. Although it is not shown in the table, that strength has continued on a short-term basis, with yesterday's close actually exceed- ing the January 26th peak. For this indicator, at least, an uptrend of some significance has resumed. The other four indices show essentially parallel action, and it is worth considering just what breadth behavior paralleling that of the Dow and the S&P may mean. The initial conclusion is that the market is showing less vitality than it did prior to last summer, and this can, indeed, not be gainsaid. For about two years, through mid-1978, the bulk of listed issues had acted considerably better than the widely- followed indicators. It must be recalled, however, that this was highly unusual behavior. An examina- tion of breadth in past upswings suggests that it generally has moved in line with the Dow. It is when breadth and broad indicators such as the Cumulative Index begin to show significantly worse action than high-quality stocks that signs of deterioration become evident. Such has not been the case of late. As noted above, all of the indicators rallied nicely from their bottoms of last fall and have not yet approached those lows in early-February trading. Recent internal action can thus, in our view. be described as a return to normalcy rather than as significant deteriora- tion. Dow-Jones Industrials (1200 p.m.) 827.88 ANTHONY W. TABELL S & P Composite (1200 p. m.) 98.62 DELAFIELD, HARVEY, TAB ELL Cumulative Index (2/15/79) 712.99 AWTrak No statement or e;o;preSlon of opinion or any otner matter herein contolned IS, or IS to be deemed to be, directly or Indirectly, on offer or the sollcltollon of an offer to buy or sell ony security referred to Or mentioned The mailer IS presented merely for Ihe of Ihe subscriber While oNe believe the sources of our Informo- hon to be reliable, we In no woy represent or guarantee the accuracy thereof nor of the statements mode herein Any aclion to be token by Ihe subscriber should be based on hiS own Investlgotlon and Informallan Janney Montgomery Scolt, Inc, as a corporation, and Its office or employees, may now have, or ma)' later take, positions or trades In respect to any securliles mentioned In thiS or any future Issue, and such position may be different from any views now or hereafter epressed In thiS or any other Issue Jonney Montgomery xoll, Inc, which IS registered With Ine SEC os on Investment adVisor, moy give adVice to Its Investment adVisory and othel (;USlomers Independently of any statements mode In thiS or In ony 01 her Issue FuMner Informal Ion on any setunly menlloned herein IS available on request