Tabell’s Market Letter – July 02, 1981

Tabell’s Market Letter – July 02, 1981

Tabell's Market Letter - July 02, 1981
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TABELLS MARKET LETTER , -C;;C—;.c—–.–.——- 909 STATE hOAD, PRINCETON, NEW JERSEY 081540 DIYISION OF MEMBER NEW YORK STOCK EXCHANGE. INC. MEMBER AMERICAN STOCK EXCHANGe — – – – — —.-0'-'-. July .2, 1981 – …' We have been focusing in recent issues of this letter on what seems to us to be one of the great ironies of the stock market forecasting profession over the past half dozen years–its preoccupation with bull and bear markets. The ironic aspect of this particular obsession stems from the fact that, ever since market timing and portfoliO strategy have become buzz words among money managers, there have occurred no bear markets in the traditional sense. The sum total of our downside experience since the 1974 lows were reached has been a two-year period in 1976-1978, when the averages declined a bit more than 20 percent but the secondary stocks rose in abundance, and three sharp declines, which were essentially intermediate in scope, in the fall of 1978, the fall of 1979 and the spring of 1980. Technical analysis provided some, occasionally ambiguous, warnings of these swings prior to their occurrence and they were, indeed, of sufficient magnitude so that the aggressive trader -might profitably have benefited from an attempt to anticipate them. For the longer term investor, however, seven years have now gone by, during which essentially the proper policy was to remain aggressively committed to equities, always providing, of course, that those equities were well chosen. We have tried, in our own forecasting efforts, to suggest that we see nothing in the technical evidence that indicates a change in this basic market environment. However, we have thing of never, we hope, deluded ourselves the past arid that intermediate term into peri thin ods king that of below- amvearrakgeetpvIu'llcneeraacbtiiolni-tcyO\iwldas-.a,…….,,,…i- not, in fact, occur. We raise this point at the moment since the market appears to be approaching a fairly critical stage, with a pattern developing out of which such intermediate term weakness might well arise. To recapitulate recent history. the Dow last achieved a high on April 27th of 1024.05 and, thereafter, reacted to a May 11th low of 963.44. The recent advance to 1011. 99 in mid-June and the subsequent decline, which has reached a low under 970 at this writing, must be regarded as a conventional upside failure. and it is now quite obvious that the May 11th low is being tested. That low may. indeed, hold and ,if it does so, it will have to be construed, in our view, as a bullish portent. Penetration, however, would strongly suggest that further intermediate-term weakness was in store. The key to our own technical interpretation at this point is that we do not think that the distributional top formed between January and April has been broadened by the recent advance-and-retreat cycle. The downside risk at the moment, therefore, seems limited to the original objective of that top, i.e., in the 925-900 area. Individual stock patterns, which have admittedly deteriorated in certain areas; for example, defense and drug issues, do not appear to suggest downside objectives consistent with much lower levels for the averages. In many ways, weakness which might occur from this point could be viewed as an example of rotating leadership. Energy issues, the major drag on the market since last fall, appear to be attempting to form bases. Since many such issues declined as much as 50 percent, further vulnerability from these levels appears limited. It is quite conceivable, however, that energy stocks, in the process of building longer-term base formations, could test their lows of a few weeks ago. This sort of test, coupled with intermediate-term declines in other areas, however, is likely to produce fairly disappointing action on the part of the broad market averages. Dow-Jones Industrial Average (12 00 pm) 965.47 S & P Composite (12 00 pm) 129.48 Cumulative Index (7/1/81) 1160.51 AWTjt ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or expression of OPinion or any o'her malter herein (ontolned os, or IS to be deemed to be, directly or Indirectly. on offer or the SOIICI'otlon of an offer 10 buy hOn to or be leI(!!IioCinbr,e security , we In referred no wCly 10 or mentioned The motler IS presented merely represent Of guarantee the accuracy thereof nor for the convel'lenct; of Ihe vbsctlb(!r Whde we believe the sources of our Informa. of the statements mode herem Any actlan to be loken by the subscriber should be based an hi' own inVestigation and mformatlon Janney Montgomery Scott, tnc as 0 corporation, and .ts officers or employees may now hove or moy loler take positions or trodes 11\ respect to ony seCUntles mentioned in Ihls or any future Issue, end such pesI).on may be different from any 'views now 01 h/eafter expressed J th,s or any other ,ssue Janney Montgomery Scolt, Inc, which IS registered With the SEC as on Investment adVisor, may give adVice to Its ,Vestment advISOry and other customers Independently of any statements mode In Ih1 or In any other Issue Further Information on any seCl.mty mentioned herein IS available on request

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