Tabell’s Market Letter – October 19, 1979

Tabell’s Market Letter – October 19, 1979

Tabell's Market Letter - October 19, 1979 page 1
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TABELL'S MARKET LETTER 906 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBEfl NEW VOAK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE October 19. 1979 , . October 8-12 abated somewlfat-th'is week. – It -would-be -difficulf; however; 'to desCribe-theweek's – action as providing any sort of convincing reversal evidence. Modest new closing lows were posted on Monday and Tuesday, and Friday morning's trading saw renewed downside pressure. Although fairly dynamic rally attempts were mounted during various times during the week, all failed to display any sort of follow-through. It was certainly impossible to read, in the week's activity, any augury that near-term lows had been seen, much less that any meaningful rally attempt was in prospect. None of this, however, is particularly relevant to putting the decline of a fortnight ago in its proper context. The meaningful question centers on whether last week's sudden collapse sug- gests an end to the irregular up-market which began in early 1978, or whether it constitutes merely a sudden, sharp, and unexpected blip on what will ultimately be recognized as an on- going uptrend. We made a preliminary attempt last week to determine just where previous declines of similar vehemence fitted in to the long-term market cycle. The result, we think, is interesting and merits some further expansion. We noted last week that on Monday, October 9, 91.1 of issues traded moved lower in price and pointed out that this was the seventh highest figure since breadth statistics have been main- tained. The near record was followed on Tuesday, October 10 by a day on which 86 of all issues traded declined. The relative rarity of such occaSIons is underscored by the fact that, since 1946, there have been only 147 trading days on which more than 75 of-all issues changing hands moved lower. The essential point which we tried to make last week was that these occurrences generally have been characteristic of two sorts of occasions 1) the terminal phase of major declines, and 2) declines which take place in reaction to sudden and unexpected events, a of two-weeks–ago. 'l'-hel—I– point is that recent action hardly falls into the first category mentioned above, since it took place within a week of the major indices' achievement of new buH-market highs. It seems, therefore, highly likely that it must be placed in the second category. It is, therefore, worth noting that most declines of this type were shortly reversed by moves to new highs before too long a time period had elapsed. We have tried to underscore this on the chart reproduced on the reverse side of this letter. The chart condenses the history of the Dow since 1946 and notes, together with the appropriate percentage, each of the 147 trading days on which 75 or more issues declined. A look at previous major bear markets reveals quite clearly that days showing an extraordinarily high percentage of declining issues were not characteristic of the ongoing stages of those downswings. When such days occurred during bear markets, they tended to occur at points very close to the terminal phase. Moreover, as the chart quite clearly shows, extraordinarily high percentages have been common characteristics of the ongoing stages of upswings, often initiated by.unexpected surprises such as the Eisenhower heart attack in 1955 or the Kennedy assassination in-late 1963. It is this sort of action that is, to us, evoked most clearly by the events of a week ago .. Another point suggested by the chart is the extraordinary frequency of broadly declining days during the late 1940's and early 1950's. This was, of course, a period in which the market was moving irregularly, much as it has of late. It was, likewise, a period of considerable contro- versy in regard to appropriate monetary policy and its relation to inflation, a period which cul- minated with the accord of March 9, 1951 with which the Fed ceased its policy of inflating the money supply by artificially supporting low interest rates. It was also the last period in which stocks. battered by monetary uncertainties and talk of impending recession /depression. sold for -the sort of historically low level which characterizes equity prices today.- – – —- While we would be reluctant to push this analogy too far. it is apparent. we think. that last week's action, on the record, hardly constitutes evidence of a major downside reversal. Indeed. it is a phenomenon. as the historical record amply shows. not at all uncharacteristic of an ongoing upswing. ANTHONY W. TABELL DELAFIELD. HARVEY. TAB ELL Dow-Jones Industrials (12 00 PM) S & P Composite (12 00 PM) Cumulative Index (10/18/79) AWTsla 825.68 102.98 735.19 No statement or expression of opinion or any other matter herein contained IS, or ,s to be deemed to be, clrcdly or mdlrectly. on offer or the sol,cltollon of on offer to buy or sell ony security referred to or mentIOned The molter 15 presented merely for Ihe of the subscrIber While we beheve the sources of our Informo flon to be relloble we In no woy represent or guarantee Ihe occurocy !hereof nor of the stotements mude hereIn Any actIon to be by the subSCriber should be based on hIS own',nvest,gotlon and Informotlon Jonney Montgomery Scott, Inc, as a corporotlon, and Its off,cers or employees, may now have, or moy loler toke posItIons or trades In respect to ony secufliles mentIoned In thIS or any future Issue, ond such posItIon may be dIfferent from ony. vIews now or hereafter elpressed In thIS or any other Issue Janney Montgomery Scott, Inc, whICh IS regIstered WIth the SEC as on Investment adVIsor, moy gIve adVICe to Its Investment adVisory a,!d other customers Independently of any stotements mode In thIS or In any other Issue Further Informotlon on any securlly mentIoned hereIn IS ova liable on request ' I..u ' I 01 '' 1955 1956 1957 1958 1959 1960 1961 )965 )96-7 1968 1970 1971 1972 1974 1975 1976 1977 1978 1979 – – –r 1- . —-….J

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