Tabell’s Market Letter – December 11, 1981

.. ( ! t !t….. .,' TABELL'S MARKET LE.. TTER . . '…' .J t., , …) …. ,.. t. …….. ….t .1'; …. l''A.. .. '809 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVla'ON 01' MEMIlE NEW VORK STOCK EXCHANQE, INC MEMII!;A AMEIII'CAN STOCK EXCHANGE – December 11, 1981 The name of the game for the market analyst is, of course, to forecast the future, i.e. what is going Jo.happen. This task is often made difficult by the fact that,.in many casea, that which has already happened is not precisely clear. The record is there to be sure, but the meaning behind that record can be obscure, to be clarified only much later. Such is the case at the present time. We know, for example, that the major market averages posted a low on September 25, 1981 and have not exceeded that low since. The problem is where to fit this known fact into an historical pattern. The question, in other words, is whether or not September 25th constituted a major cycle low, and, as OU!' readers are aware, we hsve been wrestling with this question for some weeks. One way of attacking the problem is known as the reference-cycle approach. This con- sists of comparing current stock-market action with trading which took place following past known low points. Low dates for the previous eight major stock market cycles are known quantities, and the table below attempts to compare current action with action following the eight prior dates in terms of four variables, the Dow-Jones Industrial Average, the S P 500, the Advance-Decline line and NYSE volume, smoothed vis a 25-day moving average. Through Wednesday, 53 trading days had passed since the September 25th low. and the table shows the highest level reached for each of the four market variables in the first 53 days following each previous reference date. In each case the figure is expressed as a percentage of its value on the market low date thus making market action for all nine cycles comparable. High in First 53 Days Date of As Percentage of Market Low Market Low DJ I A S & P 500 Adv-Dec Line Volume Jun 13 1949 112.64 114.47 125.09 126.43 Sep 14 1953 110.13 109.12 115.91 121.30 Oct 22 1957 107.17 107.03 116.70 109.36 Jun 26 1962 114.98 114.26 136.01 100.18 Oct 7 1966 110.29 113.39 120.00 128.58 May 26 1970 116.54 113.32 124.27 111.76 Dec 6 1974 129.81 127.09 151.03 162.52 Feb 28 1978 113.77 112.67 120.40 198.50 Sep 25 1981 108.34 112.04 113.29 112.28 As can be seen, the current market has failed to distinguish itself in any of the four categories. The Dow-Jones Industrials, now up 8.3 from their high, posted a larger advance for the first 53 days in every past market, with the exception of 1957. In terms of the S P 500, the present market fares a little bit better. Following three past market lows, 1966, 1970, and 1978. the S P posted an advance on the same order of magnitude as the current one, and in two cases its advance in early stages of the bull market was considerably less than on the present rise. Performance of the Advance-Decline Line since September has been significantly worse than at comparable stages of any of the eight prior bull markets, and this, in our view, must be considered a weakness in the present picture. Volume since September has likewise been ; disappointing. The most significant clue that a major bottom had been made following March, 1978 — a market which might, otherwise, look much like the current one —was the significant volume expansion that took place on the ensuing rise. There has been no comparable expansion of volume to date. About the only past bottom after which most indicators behaved as they are currently behaving was the one in October, 1957. There are fair numbers of similarities between that market and this one, too detailed to go into at great length here. Basically, the bottoming pro- cess in that year was the product of increasing 11lIIlness which carried on well into the Spring of 1958. It was not until Summer, 1958, more than six months after the actual bottom. that the market took off in earnest. It will be interesting to see whether or not such a pattern develops in the current instance. AWTrs Dow-Jones Industrials (1100 a.m.) 891.36 S P Composite (1100 a.m.) 125.50 Cumulative Index (12110181) 1129.10 ANTHONY W. TAB ELL' DELAFIELD, HARVEY, TABELL No 't'ment or tlxpreulon of OPIflI/;, Of eny other metltlr herem tonto!fled is, 01 1 to bt- deemed to be, dm!etJy or !fldlfedlr,' an offer or the soltcltatlon of an offer to buy or lell any leCUTI'Y referred 10 or mentioned The motter '5 preiiented merely for the convenlenc of the subSCriber Wh, e .we believe Ihe Ourtes of our Information 10 be rel'oble. we In no way represent or guerontee the accuracy thereof nor of thll stotllmenh mudll herein, Any octlon to be token by the bscnber ihould be 'ed on hIS own Invest,gotlon and Informallon Janney Montgomery Seott, Inc, as a corporation, ond Its officers or employees, may now have, or may laler toke, poslhons or trades In respect loony seUII!.el mentioned In th or any future luue, ond lvrn POSition may be d,fferent from any views now or hereafter expressed In Ih or any other usue Janney Montgomery Scott, Inc. whuh h reglstcred With the SEC a! on investment adVisor, moy give od'e 10 III Investment adVisory and olher CUslomers Independefllly of al'ly statements mode ,n IhIS or In any olher ,UVfI Furlher information on any security menhoned here.n IS OVOilabie on request