Tabell’s Market Letter – October 09, 1981

Tabell’s Market Letter – October 09, 1981

Tabell's Market Letter - October 09, 1981
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TABELL'S MARKET LETTER L .' B09 STATE ROAD, PRINCETON. NEW .JERSEY 08540 MEMBe NEW VORl( STOCK EXCH.t….QE. INC MEMBER AM ERIC'''' STOCK EXCHANoe October 9, 1981 Saint Paul reminds us that our perception of eschatology is through R glass 1arkly, and so it is with our knowledge of the stock msrket-. If the technician can be of assi!ltance -in the process of thinking about the market, it is often in setting out a few guidepots to help point the way through the rather murky landscape of day-to-day market fluctuations. ' , When the market closed two weeks ago today, it was possible to make one statement with a fair degree of assurance — that we were in a bear market, the eighth cycle bear market, as a matter of fact, in the post-World-War-U- period. This assertion couId be made by virtue of the fact that the DJIA had closed at 824.01, down 19.5 from Its April 27th closing high of 1024.05. Both the extent and the length of the decline qualified it for the bear-market appellation. The percentage drop had been greater than any Intermediate downswing in the past 30 yearll, especially the recent intermediateterm corrections of Fall 1978, Fall 1979, and Spring 1980, which.were 13.5, 11.2 and 16.0 respectively. Those declines had been fewer than 50 days long, while the present drop had gone on, as of a fortnight ago for 106 days. A cycle bear market beginning in 1981, moreover, fit rather neatly into the conventional, long-observed, four-year cycle pattern. This certainty existed two weeks ago. Since that time, the Dow has rallied 5.57 over a nineday period through Thursdays close, and two interpretations become possible. The first is that the aforementioned cyclical downswing came to an end on September 24th, and we now imd ourselves in what history will ultimately identify as a new bull market. The second is that the present rally will eventually run its course followed by the achievement of new lows. In other words. if the bear market which began last April still exists, then the last two weeks constitute part of a bear-market rally. The following table gives some figures on the seven previous bear markets plus the recent one. It can, perhaps. aid us in our thinking. Bear Market Change DJIA Length in Days No. of Rallies Average Rally Length Change in Days Longest RallI Length Change in Days 1/5/53 – 9/14/53 -13.04 176 3 3.88 24 5.27 42 7/12/57 – 10/22/57 -19.39 71 3 2.56 4 3.40 5 12/13161 – 6126162 -27.10 134 4 4.05 9 4.87 32 2/9/66 – 1017/66 -25.21 167 5 4.01 11 5.09 26 12/3168 – 5/26170 -35.94 367 11 4.35 15 7.59 40 1/11/73 – 12/6/74 -45.07 481 24 5.73 8 15.86 46 9/21/76 – 2/28/78 -26.87 362 13 3.64 14 8.72 35 4/27/81 – -19.53 106 3 3.57 12 5.04 24 'to date It must be noted first of all that the current downswing is rather short as compared to its predecessors. It has gone on for only 106 days, a shorter period than any bear market since 1957. There Is, moreover, some argument sbout dating the top of that downswing. The sctual Dow high was made in April 1956, and if that top is accepted, the market drop lasted s fun 389 days. History would seem to suggest that the current beast is somewhat short of msturity. The remainder of the table explores past rallies within bear markets. The present downswing has had three intermediate rallies since April, the longest one being the 24-day, May-June advance of just over 5. The present rally, if it Is a bear-msrket advance, will be the fourth. As we have noted in the past, through 1966 the bear-market rally was sort of a mythical beast. For the first four bear markets in the table, there were only between three and five such rallies. Since 1966, however, things have changed. The last three bear markets have hsd 11, 24, and 13 Identifiable rallies. respectively. Rallies of weIl over 5, lasting more than 40 days have not been uncommon. To expect that the current process will complete itself with only three rallies, and relatively short ones at that. would perhaps be unrealistic. What we are saying, of course, is that the current upswing, impressive as it may seem, is not at all Inconsistent with the history of past sdvances within major downswings. It could even progress a bit further, and indeed has the technical potential to do so without exceeding these historical parameters. It is conceivable. of course, that further evidence of market strength might suggest. by hindsight, that a major bear-market low was achieved on September 24th. We do not think, however, that there is evidence for such a suggestion at the present time. Dow-Jones Industrials (1200 p.m.) 874.43 S I Com';)osite (1200 p.m.) 121. 85 Cumulative Index (10/8/81) 1068.45 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWTors No Itatemen, or expressIon of opInion or any olher matter herem conrolned Is, or 11 to be deemed fa be, d,reC1ly or IndneC1Ir,' on offer or the solleltaf,on of on offer to bvy or sell any, security referred to or mentioned The malter ., prelienied merely for the conver,enn of the lubSCflber Wh, e ….e bel'eve the lOurce, of our Information to be rehab e, we In no way tepresenl or guarantee the accuracy thereaf nor of Ihe slorements mude herein Any oC1lon 10 be laken by the subscriber should be based on h own Inves1igahon and Information Janney MonTgomery ScOl!, Inc, 01 a corporation, and Its off.cers or emplovees, may now have, or may later lake, poslhons 01 trodes In respect To ony curilies menhoned m Thh or any fuTure ,ssue, and such poSlhon may be ddferent from ony views now or hereafter eplessed In Ihls or any other ,ssue Janney Montgomery Scan, Inc, whlOch ' registered w,th the SEC as on ,nyestment odylsor, may g'y!! adVice to liS ,nvestment adVISOry and othel cvllOmerl Independently of any slolements mode In this or In ony other ,nu!! 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