Tabell’s Market Letter – February 06, 1981

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCI( EXCHANGE February 6, 1981 We have been drawing attention for some time to the narrow trading range which has contained -the-Dowsince'last-August.,….. Thattradingcrange-reached a-timespan-of six months,at the end of Janu ary. At month's end, the Dow had held, for a six-month period in-a 10 59 percent ;-low-to-nign', trading range delimited by the January 6 high of 1004.69 and the December 11 low of 908.45. This marks the 32nd instance since 1940 where the Dow has first reached a month-end at which the past six months of trading have been confined to a range narrower than 11 from low to high. There appears to be a widespread belief that such trading ranges are invariably the harbinger of distributional tops. This is not necessarily the case, as the table below shows. MONTH M1iRT940 OCT 1943 .JAN 1944 OCT 1944 MAR 194 DEC 1947 SEP 1948 APR 1949 JUN 19,,1 JAN 192 APR 19;) JUL 193 SEP 19'3 MAR 19'7 MAR 19'8 OCTY99– JUL 1960 JUL 1961 JUL 1963 MAY 1964 DEC 1964 MAR 1966 JUL 1967 APR 1968 SEP 1968 FEB 1969 JUL 1971 JUN 1972 JUL 1976 JUL 1977 JUN 1979 DJIA CLOSE H7.9' 138.27 137.40 H6. ,,3 1,,4.41 181.H 178.30 174. H 242.64 270.69 274.7 27'.38 264.04 474.81 446.76 6T6.60 616.73 70;.37 69'.43 820.'6 874.13 924.77 904.24 912.22 93,.79 90;.21 8;8.;3 929.03 984.64 890.07 841. 98 SIX-MONTH TRADING RANGE 7. 49 8.82 9.40 9.81 10.93 6.86 9.76 10.91 10.10 7.98 8.72 10.'6 9.63 9.82 – -10.97 -10'; 9. ,,7 10.82 10.19 10.42 8.30 9.23 8.72 10., 8.94 9.49 10.7; 9.23 6.38 8.96 8.89 PERCENT CHANGE AFTER 6 MONTHS -10.3 9 MONTHS 12 MONTHS -11. 37 -17.0' -1.48 6.34 12.91 17.68 4. ,,8 -0.67 .67 6.64 11.16 24.93 -1. ,,8 -6.10 .97 11. 84 27.3, 29.36 -2.13 2.36 8.83 1'.86 23.07 10.96 11. o 13.03 3.28 0.39 6.18 14.95 -3 ;90 -0. 4 6.42 b.96 26.32 -8.24 7.0; 16.23 26.34 36.,2 -.. 91 19.10 30.24 -6.94–''-'-4–62 34.68 . 10-24 '.10 -0.76 12.93 10.0; -;.68 16.,9 14.37 -1'.23 20.9 6.69 -0.70 10.11 6.46 11. 88 10.88 -16.28 -,.39 4.40 -0.03 -7.;7 -1;.04 0.88 3.71 -6.69 -10.26 -6.36 -2.3, 4.16 -13.11 -14.10 .08 11.14 7.71 9.79 -3.07 -13. ,0 2.37 -,.86 -,.93 -4.02 -9.60 -3.12 -0.38 -6.68 3.08 The table shows the 31 prior instances where the six-month trading range for the Dow dropped below 11 after having been above that figure. It also shows the subsequent percentage change of the Dow after six months, nine months, and twelve months. It is true that previous bear markets have often been preceded by such trading ranges. Thus, the 1962 bear market was preceded by a narrow trading range for the six months ended July, 1961, the 1966 bear market by such a range ending in March, 1966, and the 1970 bear market by a narrowly confined period ending in February, 1969. However, in many cases, such protracted trading ranges have been only consolidations in on- going bull markets. This was the case for the periods ended June, 1951, September, 1953, July, 1963, and July, 1971. The most recent'instance of a narrow trading range, the one ended June, 1979, was somewhat ambiguous. It produced a somewhat lower market nine months later at the March, 1980 low, but the recovery thereafter was fairly steep. The average percentage changes for six months (2.5) and nine months (4.1) after narrow trading ranges are almost exactly in line with normal expectations based on 55 years of market experience. The average percentage change for twelve months (6.6) is slightly greater than the normal expectation. The market has moved up following such trading ranges 55 of the time over six months, 58 of the time over nine-month periods, and 61 of the time over twelve-month periods. All these figures are just about in line with normal expectations. It is difficult, therefore, on the face of the evidence, to assert that the current trading range, in and of itself, has any particular predictive significance. Dow-Jones Industrials (1200 PM) 951.19 S & P Composite (1200 PM) 130.02 Cumulative Index (2/5/81) 1032.46 AWT sla ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No stotement or e)(prelon of opinion or ony other motter herein contolned IS, or 1 to be deemed 10 be, dlrectl)' or Indlredly, on offer or the soliCitation of on offer fa buy or sell any security referred to or mentioned The maller IS presented merely for the converlenC(; of the subscriber While we believe Ihe sources of our information to be reliable, we In no way represent or guaranlee the accuracy thereof nor of the stalements mude herein Any odlon to be token by the subSCriber should be based on hiS own Iflvestlgotlon and Informollon Janney Montgomery SCOII, Inc, as a corporal lon, and lIs officers or employees, ma)' now have, or may loler lake, pOSitions or trades In respect 10 any securities mentioned In thiS or any future Issue, and such postllon may be dlfferenl from any views now or hereafler elprcssed In Ihls or any other Issue Janney Montgomery Scotl, Inc, which 15 r'glstered wllh the SEC as on Investment adVisor, may give adVice to ItS I!weslment adVisory and othel cus.tomcls Independently of any sotements mode kl thl or In any olher Issue Further Information on ol'lY eOJf\t'f mentioned herein IS (wolk!.ble 01'1 request —