Tabell’s Market Letter – August 10, 1979

TABELL'S MARKET LETTER ..' 909 STATE ROA.D, PRINCETON, NEW JERSEY 08540 DIVISION OF MEM6ER N.EW val'l.l(; STOCI( EX.CHANGE, INC MEM8ER AMERICAN STOCI( EXCHANGE – August 10, 1979 gest that the Dow-Jones Industrial Average had been understating the performance of the stock market. That exercise tooK the form of comparing the recent action of a dozen representative market averages to their highs of last April. The upshot of the whole thing was the demonstra- tion that, of all the major widely-followed market indicators, the Dow-Jones Industrials, and only the Dow-Jones Industrials, remained significantly below their highs of last spring. All the other indicators had exceeded, or were close to exceeding, their April highs and could fairly be des- cribed as being in uptrends dating back to lows made between October and December of last year. This week's market performance put the coda on that particular piece of analysis. In an upswing which, on the Dow, meas ured 17 points over the first three days of this week, the market moved ahead sharply with volume increasing to the 45-million-share level. All the averages we cited last week participated, and all are now comfortably above their April highs, again with the sole exception of the poor Dow Industrials which, as of this writing, were yet to exceed that peak at 878.72. There is no longer any point in coloring a general description of the market because of the inferior action of a collection of thirty stocks, however important those thirty stocks might be. lt must, we think, be considered as given that an uptrend dating back to last fall is in progress. What, then, is the next task to be accomplished The next benchmark, it seems to us, is almost a year old now, and consists of the highs made last September. The current position of most market indicators in relation to those highs is some- what of a confusing jumble. The Dow, of course, remains well below its September, 1978 peak of 907.74. Most indicators reflecting the action of transportation issues have exceeded their com- 1 managed to do so in this week's strength. Indicators based on utility stocks have, for the most equiuled or ex- ceeded their September peaks, although it must be admitted that this fails to take them to new bull-market highs, utility averages, by and large, having topped out in 1977. Financial indices find themselves comfortably at new bull-market highs, and broad-based indicators other than the Dow are, generally, ,flirting with those highs, although they have not yet exceeded them. In this class are the S & P 400 and 500, each of which, at this week's peak, was about a point under its September top. Our Cumulative Index, at around 790, is below its September high of 835, but the relative volatility of this index would suggest that further market strength could easily bring it to new high territory. What is the point, the reader msy well ask, of playing all these games with prior benchmarks We think there is one and that it is valid. For so long as large numbers of market indicators re- main below their highs of a year ago, it remains possible to interpret the market action for all of 1979 thus far as a rally within a bear market. According to this theory, the upswing which began in 1974 topped out last September, and all that has taken place since October-December of last year is nothing more than an interruption in a continuing downtrend which started a year ago. We suspect that many investors and market analysts have a vested interest in this particular inter- pretation, since it serves to confirm the rightness of what statistics tell us they have been doing for the past year or more, i.e., raising substantial amounts of cash. For so long as market action fails to demonstrate conclusively that this view is incorrect, there will be little action taken to alter portfolio stances based upon it. A sharp move above the September highs, on the other hand, might have some of the attributes of a self-fulfilling prophesy. Such a rally might-have a tendency to make large large numbers of cash-rich investors feel uncomfortable, and the market results could be both dynamic and sur- prising. We have, ourselves, never believed the bear-market-raUy theory as applied to 1979, and we continue to take the view that last September's highs will be exceeded by significant margins in the case of most indices and, by a modest amount at least, in terms of the Dow. We think that any weakness that might ensue will follow the attainment of such highs rather than precede it. We see no evidence at this point that such weakness is likely to be severe, although it is possible that such indications might accumulate in due course. For the time being, in any case, we would advise those, who; unencumbered by cash, are able to do so, to relax and enjoy what appears to be the present continuation of a less-than-two-year-old bull market. Dow-Jones Industrials (12 00 PM) S & P Composite (12 00 PM) Cumulative Index (8/9/79) AWTsla 860.49 105.69 789.84 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement k10 buy or sell or any security of OpITlIOn or any other referred to or mentioned motter herem The mater 1 contoll'led presenled ,S, or ISO be merely for the deemed'0 be, convellenC(' of d Hec y 0 r Ind Irecti,, the subscriber While on we obfefIerevoer thhe soliCitatiof n e hsourcbs o,b of onnf or ffer 1101'1 to 00 based on hiS we If\ no way re(erent or guarantee the accuracy thereof nor of the statements mude herein Any ochon to be to en y own',nvest,gat,on ar,d 'nformatlon Jonney Montgomery Scott, Inc, os a corporation, and Its officers or employecs, may now ovehes, uorSfCtmI oey lot p ;sed d'pOSltlOni or trades Ifl respect to any se,urltlcs mentioned ,(I thiS or ony future ,ssue, and such position moy be different from rh,s or any other ,ssue Jonney Montgomery Scott, Inc, which IS reglstl.'red With the SEC os on Investment odvlsor, mOf give a v Views te to Its nIonwv7sbienc;e0od er VISO t othcr rustomers Independently of ony statements mode In thIS or In ony other Issue Further information on ony security mentioned herein IS OValo e on reques —