Tabell’s Market Letter – April 18, 1980

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGe. INC MEMBER AMERICAN STOCK EXCHANGE April 18, 1980 During th'estock market'sln()sf recent advancing -,-.-. first six weeks of 1980, the lack of market breadth, i.e., the relatively small number of stocks advancing, did not go unnoticed by analysts. Likewise, the pronounced breadth weakness once the declining phase began on February 13 was also widely noted. What has gone largely unremarked, is the extent to which this phenomenon has dramatically reversed itself over the short term, since about the end of March. Indeed, by one measurement, the market has shown better breadth over the past three weeks than at any comparable period since the rally in January, 1975, following the 1974 bottom. This statement in regard to a market which has recently declined almost 150 points and sits within a dozen points of that decline's low, requires some amplification. There exists something which may be called normal breadth action, and it is based on the relationship of the number of advancing stocks and the change in the Dow. The precise nature of that relationship over some 10,000 trading days since 1942 has been investigated by computer, and, using this relationship, it is possible, on any given day, to calculate an expected number of advances based on the change in the Dow. There exist relatively few time periods in which the number of advancing stocks repeatedly exeeed their expected value. This, however, has been the case to an unusual degree since March 31. In the 12 trading days between that date and April 16, the number of ad- vances was never greatly different from its expected value and often exceeded it by a large amount. By contrast, the 15 trading days between February 5 and February 26 included 13 on which the number of advances was significantly less than the expected number based on the Dow change. The contrast between the two periods is shown in the table below. POllANCES DPTE DJIA EXP. ACT'' bIFF. Feb 5 876.62 1. 53 Feb 6 881. 83 5.21 923 765 -158 Feb 7 885.49 3.66 879 802 – 77 Feb 8 895.73 10.24 1086 878 -208 Feb 11 889.59 – 6.14 5fi4 565 1 Feb 12 898.98 9.39 1056 744 -312 Feb 13 903.84 4.86 918 799 -119 Feb 14 893.77 -10.07 425 415 – 10 Feb 15 884.98 – 8. 79 465 382 – 83 Feb 19 876.02 – 8.96 469 351 -118 Feb 20 886.86 10.84 1107 868 -239 Feb 21 868.52 -18.34 159 434 275 Feb 22 868.77 0.25 757 374 -383 Feb 25 859.81 – 8.96 463 315 -148 Feb 26 864.25 4.44 885 654 -231 ADVANCES 'DATE- -, ..,. bJ 1A EXP-.-ACT–'!HFF-.– Mar 31 785.75 8.10 I04olT9o 150 Apr 1 784.47 – 1. 28 687 963 276 Apr 2 787.80 3.33 857 1018 161 Apr 3 784.13 – 3.67 601 718 117 Apr 7 768.34 -15.79 171 342 171 Apr 8 775.00 6.66 986 968 – 18 Apr 9 785.92 10.92 1129 1159 30 Apr 10 791. 47 5.55 951 1237 286 Apr 11 791. 55 0.08 757 963 206 Apr 14 784.90 – 6.65 509 497 – 12 Apr 15 783.36 – 1. 54 687 657 – 30 Apr 16 771.25 -12.11 314 747 431 – .- Typical of the February action were February 7 and February 20. On each of these days, the Dow advanced some 10 points, and over 1,000 advancing stocks would have been expected under such conditions. The actual number of advances was more than 200 lower. By contrast, the April period featured such days as April 1 and April 11. On each of these days, the average was essentially unchanged, a phenomenon which, on an historical basis, would produce some 700 ad- .ancing stocks. On each day, however, the number of advances was well over 900. ' A dramatic reversal of this sort is a fairly rll.re occurrence in the stock market and has often been associated with important lows. It will be interesting to see whether such an event occurs in the present instance. Dow-Jones Industrials (12 00 PM) 769.11 S & P Composite (12 00 PM) 101. 21 Cumulative Index (4/17/80) 713.26 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWT sla No statement Of of opInion or ony olher motter herein contolned IS, or IS to be deemed to be, directly or Ind,rectlr on offer or the soliCitation of an offer to buy or sell any security referred to or mentioned The mOiler 1 presented merely for the converlence of the subscriber Whl e we believe the sources of our Infarma han 10 be reliable, we In no way represent or guarantee the accuracy thereof nor of Ihe statements mude herem Any action to be taken by the subscflber should be based on hu own mvestlgotlon and mformallon Janney Montgomery ScOIl, Inc, as a corpo/allon, and lIS off.cers or employees, moy now have, or moy later toke, POSitiOns or trode5 m respect to any mentioned In It'liS or any future Issue, and such position may be different from any views now or hereJfter In thiS or any other Issue Janney Montgomery Scali, Inc, whICh '5 registered With the SEC as on InveStment adVisor, may give adVICe to .ts Investment advlso,), and olhel customers Independently of any statements mode In thiS or In any other Issue Further information on any security mcroncd herein IS available on request