Tabell’s Market Letter – May 23, 1980

TABELLS MARKET LETTER .., 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCI( EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE May 23, 1980 attempting to identIfy place. – Often-these leadersh-ip shifts take place coincidentally with short-to-intermediate-term market reversals, thus making their idenhfica- tion all the more difficult. This has been especially true in the present instance. the market advance which began in early March, 1978 at 86.90 on the Standard & Poors 500 and which has continued, so far at least, through the high of 118.44 reached on February 13 of this year, a fairly conventional bull- market advance of 36. . That advance, so far, has consisted of at least three identifiable upward phases, since it was inter- rupted twice by identifiable intermediate-term corrections which took place in the fall of 1978 and in the fall of 1979. A like correction, of course, took place in February-March of this year and, since a new high is still a long way from being achieved, the question remains open as to whether that correction and the subsequent rally through yesterday, remain part of a two-year-old bull market or some other sort of process. There is no doubt, however, that the two-year period in question, even measured to current prices has not been a bad one for holders of well-selected equities. Measuring from a base date at the end of the second quarter of 1978, some 12 weeks after the bull market began, the Standard & Poors 500 was, as of this Wednesday, up almost 13. As would be expected in such a period, action has been diverse. Of 103 S & P mdustrial groups, 35 are actually down over the period and 20 have advanced less than the S & P 500. Forty-eight groups turned in an advance in excess of that of the average, with the best move so far being a 113 advance by gold issues. The low for the recent February-March correction was made on March 27, and, on the day before, the S & P 500 was at 98.68, from which point it had advanced just over 9 as of Wednesday. As could be expected over a shorter period, action has been more uniform with only 12 S & P industrial groups having shown declines over the two months involved. The largest advance to date has been the 34 -t The following table shows, on the lefthand side, the ten best-acting groups for the period June, 1978 through this week, together with their percentage change. Also shown is the percentage change for the recent rally, starting on March 26. The righthand table is the reverse of the first one. It shows the ten best acting groups on the short-term rally with their comparable performance for the two-year period. An examination shows some intersting shifts in leadership. Industry Gnoup Change Change Industry Jun 78-May 80 Mar 80-May 80 Group Change Change Mar 80-May 80 Jun 78-May 80 Gold Oil-(Crude Prod.) Machine – Tools Metals-Misc. Oil-Domestic Oil Well Equipment Home Building Offshore Drilling Distillers Textiles Apparel (S & P 500) 113 109 102 86 82 74 69 66 65 57 13 7 13 -2 -1 3 8 17 9 19 -2 9 Savings & Loan 34 4 Mobile Homes 27 -14 Tobacco 25 30 Retail Stores-Drug 24 8 Cosmetics 23 -15 Sugar Refiners 22 33 Investment Cos. -Bond 22 — Soaps 20 -10 Household Appliances 20 -15 Soft Drinks 19 – 7 (S & P 500) 9 13 Quite clearly the key word for the two-year rise to date has been energy. No fewer than four of the ten-leading groups for the June, 1978 – May, 1980 period have been associated with the oil industry. Interestingly enough, however, most of these long-term leaders have not behaved exceptionally on the recent rise. Three of the ten leading groups are actually down over the past two months, and three m0re have advanced less than the Standard & Poors 500. The only group whiCh came close to making both lists is Distillers, which just missed inclusion in the righthand half of 1Ihe table. If energy dominates the lefthand list, lower interest rates dominate the righthand side, where such groups as Savings and Loans, Mobile Homes, and Bond Funds stand to benefit. Five of the ten leaders over the past two months were actually down over the two-year period, and only two have been above- average performers for that period. Strength in the oils on Thursday may alter the picture somewhat, but it is quite obvious that the character of the market has changed quite rapidly since last March's lows from what it was over the past couple of years. It remains to be seen, of course, whether this shift in leadership will remain a permanent phenomenon. ANTHONY W. TABELL Dow-Jones Industrials (12 00 PM) 847.95 DELAFIELD, HARVEY, TABELL S & P Composite (12 00 PM) 109.95 Cumulative Index (5/22/80) 801. 38 AWT sla No statement or expression of opinion or ony other matter herein conlollled 1, or IS to be deemed 10 be, directly or indirectly, on offer or the sohcltollon of on offer to bvy or sell ony seevnty referred 10 or mentioned The mOiler IS presented merely for Ihe convel',ence of the subscriber While oNe believe the wurees of our informa- tion to be rellGble, we In no way represent or guarantee the accuracy thereof nor of the slolemenl mude herem Any aCTIOn to be taken by Ihe subscriber should be bosed on hiS own Invesllgollon and Information Janney Montgomery Scott, fnc , as 0 corporaTion, and ,Is officers or employees, moy now hove, or may loler lake, positions or trades In respect to any mentioned In thiS or any fu!ure Issue, and pas.on may be different from any Views now or hereafter expressed In thIS or any other Issue Janney Montgomery Scott, Inc, whICh IS regisered ,,h the SEC os an Investment adVisor, may give adVice to Its Investment adVisory and other customers ,ndependently of any statements mode In thiS or In any other Issue Further Information on any security menhoned here.n IS available on request