Tabell’s Market Letter – February 26, 1982

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 081540 DIVISION OF MEMBER NEW VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANQe February 26, 1982 -.–.. We -Jge ll!t …W!gJtS c0!lJ.ril.!tio!ltQ the markI!g–gp.tertainlJle1J..Q.C!-nvn1ion!.lYprovjqed – bY – l .- technical market letfers by'displaying a lengthy'set of figures detailing-the-September.lows compared-. with the then lows-to-date for nine different market indicators, on both a closing and an intra-day basis. The bulk of that table can now be consigned to history since, as most investors are aware, almost all major market indicators finally chalked up new lows in market weakness on Monday and Tuesday of this week, thus ending a five-month perIod over which the bottoms of last September had prevailed. There were, as usual, some exceptions to the rule and they are perhaps worth noting. The Dow Jones UtilitiES contininued their pattern of outperforming the rest of the market. remaining all last week above their February 18 close of 104.71, which, in turn, was significantly above the September low of 101.28. The New York Stock Exchange Financial Index followed approximately the same pattern and remains at this writing well above its September bottom, and, although the Dow Jones Transportation average and the New York Stock Exchange Composite Index both posted new lows on a closing basis, they remained above their intra-day lows of last Fall. All the other indicators mentioned found themselves, at the beginning of this week. in new low territory. The pattern of this market, however, has been a lack of follow-through to whatever chances to transpire. Thus, the rather extraordinary, high-volume strength of late January lasted for just two days and fizzled completely. As we noted last week. the market spent Tuesday and Wednesday a week ago putting on what looked like a successful test of the September lows. That test failed to remain successful much beyond this Mondayls opening bell. Likewise, conventional technical analysis might have anticipated a sharp market collapse following the decisive penetration of the lows early this week. Instead, Wednesday saw a solid if unspectacular up day, with an almost-14-point advance in the Dow, followed by further, albeit desultory, strength early Thursday. It would. it seems to us, require Pollyanna personified to assert the claim that the current stock market is acting well. and, indeed, those who seek out positive indicators give the strong impressIon of drowning men grasping for straws. It must be admitted, however. that there remain a few straws floating around to be grasped. One such is the level of short interest, discussed in this space a fort- night ago. Another statistic which has been widely cited as providing, grounds for optimism 1ha,;;sbeen the acbon of New rOi'k'''Slock'X'Cliangenew lows especlany-wBen the hIstory for tnat numoe'Fls compared with last September. Back last Fall, the Dow peaked in June at 1006 and began acontraseasonal pattern of trending downward. By August 24, the average had been trimmed 100 points to 911, and, for the first time during the year, more than 100 issues, on that day, reached new 52-week lows. Subsequently, through last September, when the recently-penetrated lows in the averages were scored, the 25 intervening trading days saw only four days on which the number of new lows dropped below 100 and the figure gradually built to a crescendo, reacing 311 on September 23, 497 on September 25, and 590 on September 28. The recent decline has been much less concentrated. The first day of more than 100 new lows since September was January 12, the Dow having then dropped to 847.70 from its December high of 892.69. Since that time, there have been 32 trading days, but there have been 20 of them on which fewer than 100 new lows were posted, and the highest figure to date is a rather modest 205 on February 23. This sort of action can be construed as bullish, especially by those who feel that the market may be displaying rotating leadership as it makes a bottom. Under this theory a group of issues made their lows last September, followed by a smaller group completing corrections this month. The ultimate denouement, it is argued, will be that the market will run out of issues with corrections to complete and thus will eventually start upward again. We do not find ourselves terribly impressed with this reasoning. For one thing, as we have amply documented, it is simply not the way in which major cycle bottoms are normally formed. Likewise we think an examination of the action of individual issues tends to suggest that the high-to-date of 205 new lows may not be a terribly long-lasting record. It is possible, for example, to take the issues in the Standard and Poors 500 as a reasonably rep- resentative sample and examine their close on February 23 versus that of September 25, 1981. 261 of the 500 issues, more than half. were the same, or lower on February 23 than they had been last September. Presumably, all of those 261 issues are fairly reasonable candidates for new 52-week low status on any further market weakness which might develop .-Another 45 issues were, on Tuesday, within 5 of their lows for September. and 65 more were between five and ten percent above those lows. Since we are dealing here with a group consisting of some one-third of all listed common issues, it is certainly not hard to see the number of new lows building to further peaks. We are. in sum, rather inclined to view Monday and Tuesday's market weakness as indicative and the subsequent strength as being. to date. without significance. Our feeling continues to be that the ultimate cycle bottom is likely to form atlevels appreciably lower than those of September-February. AWTrs Dow-Jones Industrials (1200 p.m.) 821. 92 S & P Composite (1200 p.m.) 112.87 Cumulative Index (2/25/82) 1060.99 ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL No statement or eXpreSSion of opinion or any other motler herein contolned IS, or IS to be deemed to be, directly or Indlrectl!., on offer or the ol,cllo\lon of on oHer to buy or sell ony security referred to or mentIOned The matter IS presented Merely for the convenience of the subscriber Whl e we believe the sources of our Informo tlOn to be reliable, we In no way represenl or guarontee the accuracy thereof nor of the statements mode herein Any action to be token by the subKrlber should be bosed on hiS own investigation and Informahon Jonney Montgomery Scoll, Inc, os a corporation, and Its offICers or e'Tlployees, may now hove, or may loter toke, pOSlllons or Imdes In respect to ony securities mentioned In HilS or any future Issue, and such POSition may be ddferent from any views no ….. or hereafter epreued in thiS or any other Issue Janney Montgomery Scott, Inc, which IS registered With the SEC as on Inveslment adVISor, may give odvlCe to lIs 1Ilvestmenl odvlwry and olhel customers Independently of any statements mode III Ihls or In any other Issue Further mformotlon on any security mentioned herein IS ovolloble on request