Tabell’s Market Letter – November 14, 1980

TABELL'S MARKET LETTER 909 STATE ROAD. PRINCETON, NEW JERSEY 08!540 DIVISION OF MEMBER NEW VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE November 14, 1980 The Reagan rally may have lasted for only a couple of hours before second thoughts set in, out tJ1e-stoek marketthis fo'liave' secoii'ifThoughts' regardingThe-' second thoughts. By last Friday, almost all of the gain posted on the morning following the election had been retraced, but Tuesday, Wednesday, and Thursday of this week saw three sharply advancing days which took both the Dow-Jones Industrial Average and the Standard & Poors 500 to new 1980 highs, and, in the process, took the market out of the trading range concerning which we have been prattling in this space since late last summer. As short a time as a week ago, in this space, we counseled in favor of waiting before making any definite predictions of a sizeable decline. In light of this stance, we can afford to be encouraged by this week's action without becoming totally euphoric. There was, as recently as October 30, a marginal downside breakout in the Dow which, we now know by hindsight, was false. Certainly the present upside breakout will have to be confirmed by future price firmness. Continued strength from this point would have important implications. This letter has regularly discussed the pattern of long, four-year cycles in the stock market, and the timing of the present'strength is fairly crucial in the context of cycle theory. The following table shows some relevant statistics for the seven completed major stock-market cycles since 1949,plus data on the present cycle for so far as it has continued. SiP Start Date 500 Date of High No. of S & P Days 500 To High Adv. Total Days S & P in Days End Date 500 Dec. Cycle Adv'cing Jun 13, 1949 13.55 Jan 5, 1953 26.66 987 96.7 Sep 14, 1953 22.71 14.8 1163 85 …,.., Sep 14, 1953 22.71 Jul 15, 1957 49.13 963 116.3 Oct 22, 1957 38.98 20.6 1033 'Jun26-;–i962 -52.32- 27. -U77 93 89 Jun 26, 1962 52.32 Feb 9, 1966 94.06 913 79.7 Oct 7, 1966 73.20 22.1 1080 85 Oct 7, 1966 73.20 Nov 29, 1968 108.37 516 48.0 May 26, 1970 69.29 36.1 885 58 May 26, 1970 69.29 Jan 11, 1973 120.24 665 73.5 Oct 3, 1974 62.28 48.2 1101 60 Oct 3, 1974 62.28 Sep 21, 1976 107.83 497 73.1 Mar 6, 1978 86.90 19.4 863 58 Mar 6, 1978 86.90 Nov 13, 1980 136.49' 682 57.1 To Date We have repeatedly noted that the last three cycles listed in the table above have characteristics very different from that of their four predecessors. The percentage advance in the rising phase of the 1966, 1970, and 1974 cycles was uniformly smaller, and the declining phase, at least for the first two, was considerably greater. Major bear-market declines in the 1950's and 1960's were of an approximately-20 magnitude. The declines which ended in 1970 and 1974 were 36 and 48 respectively. Even more importantly, however, the time spent in the advancing phase of the last three cycles was considerably shorter than has been the case since the middle 1960's. The first four cycles spent 900-1000 days in their advancing phase. The last three spent only 50(-600 days in their rising portion. Thus, through 1966, as the last column in the table shows, 85 or more of each cycle's total life was spent advancing. Subsequently, it has been 60 or less. The key fact is that the present cycle, now 682 trading days old, is beginning to take on some of the aspects of the earlier four cycles rather than those of the last three. With this week's new highs, it has now lasted longer, in terms of trading days, than any of the three previous market phases. although admittedly not yet by an amount that could be considered significant. Its centage advance has already exceeded that of 1966-68, although it would have a good ways to go before it were to equal the sort of increases considered normal a couple of decades ago. This change may even have started to take place with the declining phase of the last cycle which, terminating with a rather mild 19 decline, looked, in one respect at least, a great deal more like a cycle from the earlier part of the past-war period than the latter. The point is that continued strength from these levels, both in terms of time and percentage advance, will continue to make the present cycle more and more similar to those of the 1950's and 1960's and less similar to those of the 70's. Even allowing for the fact that the present advance might be in a relatively mature phase, such an interpretation is profoundly encouraging for the very long term. Dow-Jones Industrials (12 00 PM) S & P Composite (12 00 PM) Cumulative Index (11/13/80) AWT sla 981. 23 136.36 1036.46 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No stolement or expression of opInion or any other matter herein contained IS, or IS to be deemed 10 be, dtrectly or indirectly, on offer or the Sollcltotton of on offer 10 bvy tlon to based or be on sell ony securtty referred 10 or mentioned The mOiler IS presented merely reliable we III no way represent or guarantee the acclJrocy thereof nor hiS oWn'tnllesllgohon and Information Janney Montgomery SCali, Inc, for the COnvef'lence 01 the slJbscrlber WhIle oNe beheve of the statements mude herein Any octlon to be token y as a corporation, and Its officers or employees, may now htohvee,5Uorscmonfobyoeur lro5tearu t ke or trades In respect 10 any seCUrities mentioned III thiS or any future Issue, and such pOSlllon may be different from any views now or hereoJter th n thIS or any other Issue Janney Montgomery Scoll, tnc , which IS registered With Inc SEC as on Investment adVisor, may glye adVice to Its a VISOry on 0 III customers Independently of any statements mode In tnlS or In any other Issue Further Informotlon on any security mentioned herein IS OValO e on request