Tabell’s Market Letter – December 31, 1980

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK eXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE December 31, 1980 – — For some years now; -we haVestiidiectthefamiliar seasonaf. a-stage —'1- year-end rally, and it has been the custom of this letter to point out some of the conclusions that can be derived from a study of this phenomenon. We have suggested that an exhaustive study, since the Dow- Jones Industrial Average first was computed in 1897, indicated that such a rally, however miniscule, in- variably had taken place. Until recently, the year-end rally as measured by the Dow-Jones Industrial Average had always carried into January. However, two recent periods, 1976-77 and 1977-78, have pro- vided exceptions, failing for the first time in the history of the DJIA to continue into January. The 1977 bear market began from a high of 1004.65 on the last day of December, 1976. In 1978 the bear market con- tinued, penetrating the December, 1977 low on the first day of the year, plunging almost 100 points before bottoming in February. 1978-79 and 1979-80, however, saw the resumption of the usual year-end rally pattern. The following facts about the year-end rally may be noted. 1. The year-end rally often has been of great magnitude with advances as great as 28 having been recorded. It also, on occasion, has continued with only minor interruptions for as long as six months into the new year. In 1961, 1964, 1967, 1971, 1975, . and 1976, the rally continued into February or March. However, on other occasions, it has been of only a few day's duration, reaching a top extremely early. Thus, in 1960, 1970, and 1973, the rally reached a peak by the first week in January, and, as noted above, the 1976 and 1977 year-end rallies failed entirely to carry into January. 2. There has been a persistent tendency for the rally to begin early in years when the market has been up, and late in years when the market has been down. In recent upward years, 1963, 1967, 1975, and 1979 are examples, the rally commenced from early tlownWara years, rmr271966-,. 1969, ana 197T;–Ule 'rally began late in the year. 1980 was an up-year, and the apparent start date was December 11, at 908.45. 3. The important thing to watch in connection with the market action in the early months of the new year is the low for the previous December. This low has been broken in 48 years out of the past 80. However, in 28 of these 48 cases, it was broken in January and February. For example, in 1970, 1973, 1977, and 1978, the December low was broken by early January. Since 1937, it has never been broken later than mid-March, with the exception of 1965 and 1974. Thus, if the market is able to hold above its December low for the first 2-1/2 months of the year, chances become good that this low will not be broken. In 1980, despite the break in early March, the year turned out to be a good one. 4. In years when the December low has been broken, the subsequent trend has been downward two-thirds of the time. 1962, 1966, 1969, 1973, 1974, and 1977 are typical cases. 1965 and 1978, along with 1980, as noted above, were exceptions. 5. The magnitude of the rally is an important clue as to the year's market trend. For example, an advance of 10 or more from the December low has been followed by an upward or neutral market in 35 of the 41 years that such an advance has occurred. An advance of less than 10 or more from the December low before an identifiable correction takes place has been followed by a downward market in 26 of the 39 years. In 1963, 1964, 1971, and 1980, the year-end rally approximated 10, and in 1972, it was 17. In 1962, 1970, 1973,and 1977, for example, it was less than this figure. 6. The length of time in which the rally continues into the new year also is important. For example, in 22 years, the rally continued -into-March or l!i.te-r. -In 19 6ftllese 22 years, the eventual trend was upward. In 1964, 1972, 1975, and 1976, the year-end rally continued into March and in 1961, 1967, 1971, and 1980, into February. This year, therefore, the December 11 closing low of 908.45 becomes an important reference point to watch. If the Dow is able to advance from this low by 10, not unlike last year, roughly to the 1000 level, or continue a rally into February or March, the historical implications would be bullish. Dow-Jones Industrials (2 00 PM) S & P Composite (2 00 PM) Cumulative Index (12/30/80) 964.85 135.77 1017.64 ANTHONY W. TABELL HARVEY, TABELL AWTld No stotement or expression of opinion or any other matler herein contained IS, or IS to be deemed to be dlreclly or mdlrecily, on offer or the oitl;llollon of on offer to buy or sell ony security referred to or mentIoned The matter IS presented merely for the converlence of the subscrIber While -Ne belIeve the sources of our information to be rel,able, we In no way represent or guarantee the accuracy thereof nor of the statements mode herein Any acllon to be token by ihe subscriber should be hosed on h,s own investIgatIon and Informallon Janney Montgomery Scott, Inc, os 0 corporatIon, end lIS offIcers or employees, may now have, or may later lake, posihons or trades In respect 10 any securItIes mentioned In thIS or any future Issue, and such pOSItIOn may be different from any vIews now or hereafter eypressed In thIS or any other Issue Janney Montgomery Scott, Inc, whICh IS regIstered wllh the SEC as on Investmen' adVIsor, may gIve adVIce 10 115 Investment adVISOry and othel customers Independently of any statements mode In thIS or In any other Issue Further Informchon on any sec\Jflly mentIoned herem IS available on request ( l