Tabell’s Market Letter – July 18, 1980

Tabell’s Market Letter – July 18, 1980

Tabell's Market Letter - July 18, 1980 page 1
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TABELL'S MARKET LETTER ..- ……. 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANOE INC MEMBER AMERICAN STOCK EXCHANGE July 18, 1980 — -level-on occurred, carrYing the average to its highest hivel in 22 months. The significance of this event has not, of course, gone unnoticed in the investment community. In the last three years, each time the Dow has rallied to this area, it has met with resistance, and on three occasions, serious corrections have ensued over relatively short periods of time. -Da-te 09/08/78 11/14/78 10105/79 11/07/79 02/13/80 04/21/80 -DJI-A 907.74(H) 785.26(L) 897.61(H) 796. 67(L) 903.84(H) 759. 13(L) Points -122.48 -100.04 -144.71 Change -13.49 -11.15 -16.01 Trading Days 48 24 47 Breadth (A-DIU) 721. 18(H) 669.36(L) 692.16(H) 644.16(L) 667.13(H) 621. 16(L) It would, therefore, not be unprecedented over the short term to see the market again retrace a portion of the strong advance in the Dow which, in the period of 63 trading days, has seen the Dow advance from a low on April 21 of 759.13, to a new closing high on July 17 of 915.10, or approximately 20.55. From a short-term technical point of view, the three-month rally has done just about all that could be expected. When the longer-term outlook, however, is examined, a number of building blocks seem to be . ,tn. . .. .,.. .., e. .., 80's, As of this letter are aware, a recent examination of the four-year-cycle a new major cycle began on March 6, 1978 where the Dow closed at 742.72. Our conclusion sug- gested, in part,, .in terms of cycle analysis, therefore, it seems to us that the market is at a crucial stage, Extension of the present advance to new highs would suggest that the now-two- year-old market cycle continues in its upward phase. If this is the case, the historical record would support the likelihood of a protracted period of advancing prices with further substantial percentage increase. Our interpretation of the four-year-cycle would seem to be confirmed by the market action of this week. It is interesting to note that the cyc Ie which began on March 6, 1978 is now 598 trading days old, While the average cycle length of the seven cycles studied in the post-war experience is 1043 days. The decisive penetration of the overhead supply between 850-900 which has repeatedly turned back all attempts at a meaningful advance for the past three years indicates substantially higher long-term objectives, The point-and-figure chart of the Dow-Jones Industrial Average on the reverse side of this letter properly puts into perspective the potential significance of the recent strength in the market. Since the three-year trading range of 900-760 on the DJIA was penetrated by a 920 posting on the upside, it is possible to project long-term upside objectives in excess of 1200 on the DJIA, This is not to say that there are not possible areas of concern on the horizon. Breadth of the market action, although recently in gear with the DJIA short-term, must be watched closely. Classic breadth analysis suggests potential bearish implications when a new high in the market averages is unconfirmed by a like high in breadth, While the Dow-Jones Industrial Average moved to new high territory yesterday, our breadth index at approximately 655 remains below the levels of September, 1978 (721.18), October, 1979 (692.16), and February, 1980 (667.13). This sort of action could set the stage for a divergence of the classic sort. It should be remembered, however, that breadth divergences historically have taken place over protracted periods of time, and there have often been lags between new highs in the averages and ultimate confirmation by market breadth, How this breadth action evolves should be watched closely as it could give a major clue to the long-term performance of the market. Dow-Jones Industrials (12 00 PM) 921. 59 S 8. P Composite (12 00 PM) 121. 97 Cumulative Index (7/17/80) 916.73 ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL RJS sla No statement or expression of opinion or any other motter herein conlolned IS, or IS to be deemed to be, directly Of indirectly, on offer or Ihe 501lCllahon of an offer 10 buy or sell any secunty referred 10 or mentioned The matter IS presented merely for Ihe convel'lence of the subscriber While we believe the sources of our Informohan to be reliable, we In no way represent or guarantee the accuracy thereof ncr of the statements mude herem Any action TO be la'.en by lhe !oubscnber should be based on hiS own mvestlgatlon and Information Janney Montgomery Scott, Inc, as a corporation, and Its officers or employees, may now halle, or may later toke, pOSitions or trodes In respect to ony secuntles mentioned m thiS or any future Issue, and such pOSItion may be different from any IIlews now or hereafter expressed m Ihls or any other Issue Janney Montgomery Scott, Inc, which IS registered with the SEC as on Inllestment odvlsor, may give adVice to lIS Investment adllisory and athel customers Independently of any statements mode In thiS or In any other Issue Further Informallon on any security mentioned herein IS available on request i 10100 1100 1'-'00 eoo lOC 0;;0 600 J )O ac.o /00 0 , l1li ,, DOW JONES 1l'Jl!U0 I -AT INDEX , 20 POINT , .i ( f / ! IV

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