Tabell’s Market Letter – September 05, 1980

-, TABELL'S MARKET … LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORI( STOCK EXCHANGE. INC MEMBER AMERICAN STOCK EXCHANGE September 5, 1980 – –'-0 loss-or-wliat had been obviously-unsustaim,ble 1!'0I)lentumy!,-s'note(j-in'l,ast wee!'s- letter, stock market behavior continues reasonably satisfactorily on a short-term basis. After the triple failure to move through the 970 level at mid-August, the Dow was obviously in need of some correction or consolidation. Such a correction emerged during the last week of August, with the decline from an intraday high of 969.45 on August 22 to an intraday low of 923.04 a week, ago. This correction abruptly reversed itself in last week's action, which featured a 12-point rally with over 1300 advancing stocks on Wednesday, auspicious action despite the fact that it was halted in Thursday's rumor-clouded trading. What seems to us most encouraging, from a technical point of view, is the point from which the rally began. We had commented last week that the most discouraging possible action would have been for a downward push to the 940-920 area to take place, followed by continued activity in that area. Such a formation would have produced a potential head-and-shoulders top which might have had serious downside implications. The Dow instead reacted sharply from the middle part of that range, suggesting that the next probable pattern may be a base formation with its upper limit around the mid-950's followed, possibly later this month, by another attempt to move through the 970 triple top. This scenario gains further credibility based on the action of other indicators. The Dow Transpor- tation Average, which never had formed all that much in the way of a top, attained both new closing and intraday peaks in Wednesday's and Thursday's trading. So did the American Stock Exchange Index, for which new highs have become the rule rather than the exception. The Dow Utilities which, in a market sensitive to interest rates, had reached their downside objective in early August, also moved ahead sharply on Wednesday and, like the Industrials, moved into the area of overhead supply from their earlier peak around the 115 level, a peak which, in the case of utilities, had been scored back in is the case with the industrials, another attack on — , . , !!p'2ears a likelihood. – – – —– … – — – Perhaps the most interesting technical action over the past couple of months has been shown by the various financial averages which, unlike some other indicators, retreated relatively little in the recent market weakness. The New York Stock Exchange Financial Index had held in a range between a closing low of 65.37 on June 20 and 68.21 on August 15. It was penetrated on Wednesday, with the achievement of a new peak at 68.75. The Standard & Poor's Financial Index has held in a similar lateral formation with a low around 12.80 and a high, to date, around 13.30. That high, in turn, was just about equalled this week. Continued strength in issues could provide a new major area of market leadership. ADVANCES DaIE DJIa DIEE. Meanwhile, breadth action, a cause of possible concern as discussed last week, has been AIJS 15 966.72 4.09 871 855 – 16 satisfactory throughout the entire episode. Aug A'J9 18 19 948.63 939.85 -18.09 – 8.78 217 494 268 51 458 – J6 AU9 20 945.31 5.46 917 897 – !O The table at the left shows the actual number of advancing stocks versus the normal or expected number based on the change in the Dow, AIJ9 !1 955.03 9.72 1044 1187 143 Aug !2 958.19 3.16 853 1007 154 AU9 !5 956.23 – 1.96 696 588 -108 -AIJS 26 953.41 2.82 660 694 34 -Aug 27 943.09 -lO.3! 444 432 12 AU9 28 930.38 -12.71 -AIJ9 !9 932.59 2.21 5,.,. 2 940.78 8.19 363 386 23 800 753 47 987 1049 62- s,.1' 3 953.16 12.38 1137 1355 218 -Sep 4 948.81 4.35 628 795 167 .. a concept which we have discussed in this letter in the past. As the table quite clearly indicates, the number of advancing issues on most days since the market began its decline on August 15 has been not that different from the normal value, and on at least four days, including Wednesday and Thursday, the number of advancing stocks was significantly greater than its expected normal value. Our daily breadth index, meanwhile, has moved extremely close to a penetration of its last benchmark high, achieved last January 28. In short, more evidence appears to be required before it is possible to draw unduly pessimistic conclusions from the market correction since mid-August. Dow-Jones Industrials (12 00 PM) S & P Composite (1200 PM) Cumulative Index (9/4780) 946.33 125.32 993.54 ANTHONY W. TAB ELL DELAFIELD, HARVEY. TABELL AWTld No statement or expreUton of opinion or any other motter herein contolned IS, or IS 10 be deemed to be, dnedly or md,re,'ly, on offer or the 501ltallon of on offer to buy or Sell any SetUrl1y referred to Of mentioned The molTer IS presented merely for the convef'lencs of the subscriber While oNe believe the sourtes of our IIlforma lion to be reliable, we In no way represent or guarantee the accvtaty thereof nor of the statements mude herem Any a,tlon to be tolecn by the 5vbsctlber should be based on hIS own Investigation and ,nformat,on Janney Montgomery 5011, Inc, as a corporation, and Its offICers or employees, may now have, or may later tOKe, positions or trades In resped to any seCurities mentioned In thiS or any future lSue, and such pOSitIOn may be d,FferenJ from any views now or hereafter epressed In thiS or any other Issue Janney Montgomery Scoll, Inc, which Is registered With the SEC as on Investment adVisor, may give adVICe to Its Investment adVisory and othe! wstomers Independently of any statements mode III thiS or III any other Issue Further informatIOn on ony security mentioned herein IS available on request