Tabell’s Market Letter – February 23, 1979

———————————————- TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCK eXCHANGe. INC MEMBER AMERICAN STOCK eXCHANGE ' –' — -,.- ..,– . – – – —'- February 23, 1979 … -i – '- It is alw-ays difficult to comment on a stock market that is doin-g and the past few months have provided an almost perfect example of that genre. Since 11th, te Dow 5 from its 1977-78 high of 907.74, it has completed no fewer rune of a magmtude of 4 Or greater, and none of these swings have had any notlceable power,the longest one having been the. 27-day rally from the mid-December lows to the high of January 26. The remainder of the swings have lasted from one to nine- teen trading days before being reversed. Despite all of this movement back and forth how- ever, little has been accomplished in the way of moving prices in either direction, the 'bulk of trading having been contained in the 800-850 range on the Dow. This dreary process has now gone on for no fewer than 112 trading days. The swings involved are listed in the table below. DATE DJ AVERAGE CHANGE NUMBER OF DAYS Sept. 11 1978 907.74 Sept. 20 1978 857.16 Oct. 11 1978 901. 42 Oct. 31 978 792.45 Nov. 11978 827.79 Nov. 14 1978 785.26 Dec. 12 1978 821. 90 Dec. 18 1978 787.51 – – – ., Jan. -26 197-9…..,-.–859.-75 Feb. 71979 816.01 Feb. 21 1979 834.55 – 5.57 5.16 -12.09 4.46 – 5.14 4.67 – 4.18 .- 9.-1-7 – 5.09 2.27 7 15 14 1 9 19 4 27 8 8 Despite the fact that this sort of action has been, to say the least, uninteresting, it does, nonetheless, lend itself to analysis, in that it is somewhat unusual. The market spends the bulk of its time within some sort of recognizable trend, either up or down, and long periods such as the present one in which the major averages fail to post new high or lows of any significance thus tend to present certain unique aspects. One interesting tool which can be used to measure and compare this sort of action goes by the rather awesome name of an absolute momentum index. It consists, simply, of adding up daily percentage change, regardless of direction, over a protracted period, say 100 trading days. Thus, in the past 100 days, the market has accumulated a percentage change on a daily basis of over 100 by moving up and down, despite the fact that, over the same period, the net result of all this activity has been nothing more than to move the Dow down by a little over 3. It is often useful to adjust such an index of absolute momentum by subtracting a correction factor based on the actual amount that the market has moved. In the present instance, of course, this correction factor is relatively small since there has been very little real momentum. The adjusted index, therefore, now finds itself at a relatively high level. This sort of level, when attained in the has, more often than not, held bullish connotations. It has, for example, tended to be attained toward the end of fairly important base-formation periods. A few examples are January-March 1958, October-November 1962, January 1967, June-October 1970, and October 1974-March 1975. It has also tended to reach high levels during pauses in ongoing bull markets, notable instances being in the fall of 1950, January-February 1956, and late 1975. Although similar levels have admittedly prevailed at market tops in the past, they have not done so as often nor with the same consistency as in the present case. Our adjusted index has essentially remained at an abnormally high level ever since Oct- ober of last year. In the past, such an impasse has most often ultimately been resolved by higher prices. Dow-Jones Industrials (1200 p.m.) 825.36 ANTHONY W. TABELL S & P Composite (1200 p.m.) 98.09 DELAFIELD, HARVEY, TAB ELL Cumulative Index (2/22/79) 711.98 No statement or expression of opinion or any other matter herein COntolned IS, or IS to be deemed to be, directly or ,nd,rectlr,' on offer or the sol,c.lol.on of on offer to buy or sell any secvnty referred 10 or menhoned The molter IS presented merely for The converlence of the subscriber Wh, e oNe believe the SOurces of our Informo- han to be relloble, we m no way repres!!nt or guarantee the accuracy thereof nor of the statements mode herem Any actIOn to be laken by the svbscrlber should be based on hiS own mvestlgahon ond .nformatlon Jonney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now have, or may later toke, posItions or trades In respect to any scvrltles mentioned In thiS or any fvture Issue, and Uen position may be dlffere, from any views now or hereafter eypressed m thu or any other Issue Janney Montgomery Scott, Inc, whICh IS regiStered With the SEC as on mvestment adVisor, may give adVICe to Its Investmenl adVisory and othel customers Independently of any statements mode In It, or In any other Issve Fvrlher Information on any security menltoned herem IS ovoilable on request