Tabell’s Market Letter – January 23, 1981

Tabell’s Market Letter – January 23, 1981

Tabell's Market Letter - January 23, 1981
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW .JERSEY 08540 DIVISION OF MEMBER NEW YOAK STOCK EXCHANGE, INC MEMBEA AMERICAN STOCK eXCHANGE January 23, 1981 – – Wehavetried to -focusin cthelast-twolssues-f..thiseHer-onthe dichotomy'sho;vn by the bhavior of -the widely-followed marketaverages and that of individual stocks. -We -have -suggested- that the loss of market momentum has been an ongoing process evident to the most casual observer ever since last summer. a point underscored by the fact that the Dow at today's level is about at the same level as during the first week of last August. We have also noted, however, that individual stock analysis reveals the fact that a certain degree of rotating leadership is indeed present, with possible new major uptrends emerging to replace the ineVltable number of stocks dropping by the wayside. This sort of environment makes a market forecast particularly difficult since so much depends on accidents of timing. If all those stocks which have entered into corrective phases begin moving toward their downside objectives at the same time, the result in terms of the averages is unlikely to be pleasanL If, however, corrective moves turn out to be slower and are combined with upside achon on the part of emerging new leaders, the ;oular indices could well give a good account of themselves. In terms of the general market, the action of the Dow ever since last August has essentially consi5ted of a series of ever-widening upward and downward swin!,s (of which more below). The last high attained was at 1004.69 on January 6, the third trading day of the new year. Through Monday of this week, it had found support m the mid-960's, but in the latter part of the week, that support level was penetrated, and an hourly low of 937,as of this wrtting, representing a 6.7 downswing from the January 6 high, has now been attained. This action has at least some of the earmarks of a correction well within the bounds of normality. How- ever momentous the trading action during the first week in January may have appeared, there was not sufficient time in that week, and in the weeks which preceeded and followed it, to form that important a distributional top. Such a top as exists may be dated as having begun to form on December 22 when the Dow went up 20 pOints to 958 and was terminated by the sharp market break this Tuesday. On the implica- tions of that formation alone, there is very little reason to expect the market decline to carry much further than it has already done. The ability to hold current levels overthe next few weeks, therefore. would have – -t.,- be interpreted as bullish evidence – –.- — .., , – – – – — – .. – – – .- – All this, however, must be viewed in a long-range context, and, as noted above, to do this, one must go back to last August. On August 15, the Dow reached a high of 966.72, 27 above its level at the starting point of the rally on March 27. Durtng that whole advance, there were only three corrections of any magnitude, the largest being 4 and lasting for 6 days. The major swings which have occurred in the Dow since that time are documented in the table below. Date DJIA Change Date DJIA Change Aug. 15, Aug. 28, Sep. 3, Sep. 8, Sep. 22, Sep. 29, 1980 1980 1980 1980 1980 1980 966.72 930.38 953.16 928.58 974.57 921. 93 -3.76 2.45 -2.58 4.95 -5.40 Oct. Oct. Nov. Dec. Jan. Jan. 15, 30, 20, 11, 6, 22, 1980 1980 1980 1980 1981 1981 972.44 917.75 1000.17 908.45 1004.69 940.44 5.48 -5.62 8.98 -9,17 10.59 -6.40 To the technician, the most outstanding feature of this five months of action is the fact that it is a broadening formation. Inspection of the first five lows shown in the table, from the correction low of August 28 to the bottom of December 11 from which point the year-end rally began, reveals that each one of these lows is successivelY lower than the previous one. With two exceptions, the peaks of September 3 and October 15, precisely the same is true in the opposite direction for the highs. Each high has tended, during this period, to take place at a higher level. For the analyst, formations of this sort are ground on which it is necessary to tread with extreme caution. As the lateral formation progressed, one has had to resist the temptation to cry wolf at each successive downside breakout or to become bullish as each new -high was made. The continuing divergence in individual stock patterns has, of course, been one factor that has helped to resist this sort of temptation. It is well to remember that no market environment goes on forever. At some stage, a breakout from this fIve-month trading range will take place, and it will be real. That trading range has now produced enough fluctuation and sufficient volume so that such a breakout, when it occurs, and if it can be properly identified, will be meaningful in whatever direction that breakout takes place. We do not ourselves possess the prescience claimed by some of our colleagues which would enable us to predict the direction of that ultimate breakout with any degree of certainty. Indeed, we see the evidence as not bemg completely in, and we think it is precisely that condition of uncertainty which market action has been reflecting since mid-August. It will be the task of this letter in future weeks to try to identify the resolution to this dilemma just as early as is honestly possible. Dow-Jones Industrials (12 00 PM) 939.59' S & P Composite (12 00 PM) 130.11 Cumulative Index (1122181) 1025.82 AWT sla ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or epreu.on of op.n.on Of any other motter here.n contcltned 'S, or .s to be deemed to be, d.rectly or IOdHectly, on offer or the SOI'C.totlon of an offer to buy or sell cny security referred to or mentioned The mailer IS presented merely for the conve,,1enct of the subscriber While we believe the sources of our informa- tion to be reliable, we In no way repreenl or guarantee the occvrocy thereof nor of the swtements mude herein Any acllon to be token by the subscriber should be based on his own investigation and Information Janney Montgomery Scott, Inc, as Il corporation, and Its offICers or employees, may now hoe, or may loter toke, positions or trodes In respect to any seCUflhcs mentioned In thiS or any future Issue, and such position may be different from any views now or hc'eofter exprened In HilS or any other .nue Janney Montgomery Scoll, Inc, wh,ch IS reglste'ed with the SEC as on Investment odv.sor, may gIVe adVice to ,ts mvestment adVisory and othe. customers Independently of any statements mode In thiS or In any alher Issue Further miormtlOn on any security mentioned herem IS avollable on request

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