Tabell’s Market Letter – March 13, 1981

Tabell’s Market Letter – March 13, 1981

Tabell's Market Letter - March 13, 1981
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-T – -. -..,;..,.. TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER New YORK STOCK EXCHANGE INC MEMBER AMERICAN STOCK eXCHANGE March 13, 1981 A good deal of recent comment, much of it Ilegative, has centered. arounLs!9gk.J!l!,ket,.bradth.sta – – tiatics. n'h8seenpfinteQ- ounrt most- breadtfiffidfces (iridicators .based on thenumbers-oradvanc' -. ing versus declining stocks) peaked out last September and have failed to make new highs since, especially on the year-end rally which topped out in early January. All of this is indeed, true, but its significance may well be questioned. Breadth indicators behaved in a certain fashion in relation to the major market averages for a great many years. There is now some suggestion that that relationship may be changing. lrn/Ir–yI II cI qSE II I I \v' 90C II II II I II I I BOC II I II I I I, I I II I I I II II I \'oc II I II I \I I I II I I I\ – -. soc 000 – – – o-o 00 II I II I I P\t /\ /\I — ,. I VV- \I I I – – — i I DOH J9NES INDU I -I I 0 ,I !. I I \ . / ,r- – I .– – – II / YI 00 I ! I I II II II I I I I I I /Y I I I I II I II I II I I I I I I / I I I I I II I I! I I I I I I I I I I I I I I I I I I I I I I I I I i I i i i i I i I M I I The chart above shows the history of the Dow-Jones Industrisl Average and a daily breadth indicator since 1949. Peaks in breadth are denoted by solid lines and troughs in breadth by dotted lines. To simplify the chart, both the Dow and breadth have been drawn showing only major peaks and valleys, with intervening fluctuations eliminated. The chart quite clearly shows that from 1949 to 1975 the relationship was consistent. Bottoms in breadth tended to coincide with those of the Dow, and breadth peaks, as the solid lines clearly show, led peaks in the Dow by a considerable amount. Breadth, therefore, had predictive vslue. As the market proceeded to new highs with breadth failing to confirm, the position of the averages became increasingly more vulnerable and, invariably, a decline of significant proportions eventually ensued. From 1976 through March, 1978, however, a major decline took place in the market averages with no foreshadowing peak occurring in the breadth index. By contrast, the breadth index peaked shortly after the market had started up in September, 1979 and bottomed again in March of last year at a time that the Dow was still in the process of moving ahead. Breadth, in other words, seems to be out of gear with its historical behavior. This divergence, it seems to us, calls into question the whole historicsl relationship. It is conceiv- able, for example, that the Dow might continue to move ahead while breadth action deteriorated, precisely the opposite of what occurred in 1976-1978. There is some suggestion of -this in individusl stock patterns, where loss of momentum is being shown in a fair number of stocks, many of secondary quslity, while major issues still possess patterns which suggest that they might move higher. Quite obviously, the current implications are unclear, and until such time as the pattern clarifies, it would be wise to avoid putting too simplistic an interpretation on the behavior of breadth statistics. Dow-Jones Industrials (1200 PM) SloP Composite (1200 PM) ;umulative Index (3/12/81) AWTsla 992.16 133.83 1075.81 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL No statement or expreSlon of opmlon or any other motter herein contCIned IS, or IS to be deemed to be, directly or Indirectly, an offer or the soliCitation of on offer to buy or sell any security referred to or mentioned The moiler IS pH!sented merely for the converlence of the subscrtber Whtle we belteve lhe sources of our tnformalion to be relllJble, we In no way represent or guarantee the accuracy Ihereaf nor of lhe slotements mude herem Any action to be toklln by the subSCriber should be based on hiS own Investigation and Informatlo! Janney Montgomllry SCali, Inc, as a corporation, and ,ts offIcers or employees, may now have, or may later toke, poslhons or trades In respect to any secuntles mentIoned In thIS or any future Issue, and such posItIon may be dIfferent from any vIews now or hereafter expressed In Ihls or ony othlH Issue Janney Montgomery Scott, Inc, wh,ch 1 regIstered WIth the SEC as on Investment adVisor, may gIve adVIce to 115 mvestment advuory and othel customers Independently of any statements mode 1M Ihn or In ony other Issue Further Inlmmo/lon on any secuflty menltoned hereIn 1 ovotloble on request

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