Tabell’s Market Letter – July 24, 1981
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEy 081540 DIVISION OF MEMBER NEW VORK STOCK EXCHANoe. INC MEMBE AMERICAN STOCK EXCHANoe – July 24, 1981 , .As, .0L a to resist the temptation with. alI!.q!, -than- 3O-Yi'.r…wstorYl…0ften find .itdiffic)llt quote from past issues. We apolog;.ze to our, readers' in. advance -for the fact that this week's issue consists almost entirely of such quotes. The reasons will, however, be apparent. From the issue of November 3, 1978 Monday featured an almost-classic selling climax which totally faIled to follow through in Tuesday's trading as a 17-point decline to 792.45 took place in what may come to be known as the Halloween Horror Story. Then on Wednesday, ostensibly due to President Carter's plan to strengthen the dollar, came a 35-point rally … It is, in sum, an undeniable fact that the sort of condition that the market had reached late last week and early this week was a rare bird indeed for the post-World-War II period. It is possible to go even further and state that that condition, when achleved in the past 30 years, has been almost universally associated with major market bottoms. Climax lows are not always the actual lows in the averages, and, indeed, they may be followed by new lows often quite some time later. Such climactic troughs, however, have usually tended to pinpoint what may be thought of as the effective bottom. Having said all this, we are compelled to raise a more-than-moderately disquieting point. It all took place at the wrong time. The textbook climax action of last week occurred, not after a major downswing, but very close to a market top scored just last September. This, and the fact cannot be ignored, is totally without precedent for the last 30 years … From the issue of October 19, 1979 We noted last week that on n!onday, October 9, 91.1 of issues traded moved lower in price and pointed out that this was the seventh highest figure since breadth statistics have been maintained. The near record was followed on Tuesday, October 10 by a day on which 86 of all issues traded declined. The relative rarity of such occasions is underscored by the fact that since 1946, there have been only 147 days on which more man 15 of all 19u ….. nanos . The essimtial p'o!'t which we tried to make last week was that these occurrences generally have been of two sorts of occasions 1) the terminal phase of declines, and 2) declines which take place in reaction to sudden and un- expected events, a category which, we think, suitably characterizes Mr. Volcker's bombshell of two weeks ago. The point is that recent action hardly falls into the first category mentioned above, since it took place within a week of the major indices' achievement of new bull-market highs. It seems therefore, highly likely that it must be placed in the second category. It is, therefore, worth noting that most declines of this type were shortly reversed by moves to new highs before too long a time period had elapsed. From the issue of March 28, 1980 If the intervention of precious metal prices into equity trading was a new phenomenon, the effect it produced was an old one … From a technical point of view, Thursday's trading was straight out of the textbooks, constituting the familiar phenomenon known as a selling climax. The occurrence of this particular classic example, We must quickly point out, does not necessarily suggest that the stock market saw its absolute low of 729.95 intraday for the Dow on Thursday afternoon … We have in the past in this letter used the technique of suggesting that an effective bot- tom has been reached … This reminder is, we think applicable in the present instance … Our feeling, however, based on Thursday's action plus the historically oversold condition which preceded it, is that the preliminary stages of a technical rebuilding process have probably begun. And here we go again. Just three months after reaching a rally high of 1024.05 the Dow has declined almost 100 points to a closing low of 924.66 on Wednesday. What has conspicuously failed to occur so far is the sort of selling-climax action which took place on each of the three occasions described above. As the quoted text makes clear, that sort of action,capping short, sharp declines which took place shortly after new highs had been made, at the time, was unexpected. Now, after three repetitlons in tWD and a half years, it would be logical to expect the current declining phase to end with action not dissimilar to the sort of thing described above. Markets, of course, have a tendency to produce surprises, and the present one could sur- prise in one of two ways. First, it could develop into something more than an intermediate-scale decline, on the order of the three discussed above, and ultimately turn out to be of major proportions. As we have noted in the past, we doubt the likelihood of this eventuality based on present technical patterns. A second surprise would be a decline which petered out and which failed to end with the climactic conditions which have now become commonplace. While this is possible, we do not think that climactic action is yet widely enough expected to make its absence a likelihood. Dow-Jones Industrial Average (12 00 p. m.) 932.36 S & P Composite (1200 p.m.) 128.14 CumUlative Index (7/23/81 1126.83 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL ATWrs No slaleml!!nt or c)(prCUlon of Opinion or any other motter herein tonlolned Is, or to be deemed to be, directly or indirectly, an offer or the soliCitation of on oHer to buy or sell any security referred to or menlloned The molter IS presented merely for the convenience of the subscrober While we belteve the sourtes of our .nformotlon 10 be reliable, WI! In no way represent or guorontee the occuroty thereof nor of the statements mode herein Any aellon to be IOen by the subscriber shOUld be based on hiS own investigation and Informallon Janney Montgomery Scott, lnt , as a corporation, and Its officers or employe!'s, may now have, or may later lake, positions or trades In respect ta any seCUrities mentioned In thiS or any future Issue, and such pOSllion may be different frOm any vlew now or hereafter exprested In thIS or any other Issue Janney MOl'llgomery Scott, Inc, which IS registered with the SEC as on Investment odvlsor, may give adVice to 'IS Investment odvnory and othel customers Independently of any statements made In thiS or Hl any other Issue Further information on any serurlly mentioned here'n IS available on request