Viewing Month: July 1982

Tabell’s Market Letter – July 02, 1982

Tabell’s Market Letter – July 02, 1982

Tabell's Market Letter - July 02, 1982
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TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIYISION OF MEMBER NEW VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE –..,,…..-,….,.. ,.,.-.,.,I——-,…..– -.July2;-lJ——,——-'I-, .. ' .. i A distinction which investors often fail to make is the one between forecattng and the formulation of investmellt policy. The former is an art onto itself, involving many possible disciplines, technical, economic, and fundamental. The latter 18 derlvative. It consists of using forecasts, along WIth other tools, to approach, as closely as possible, a desired invest- ment result. As market technicans, we find ourselves, perforce, in the forecasting dodge. We have, in the course of that career, issued a number of forecasts, whose ultimate outcomes have ranged from being correct — to an extent amazing even to us — to being gloriously, spectacularly, and totally wrong. When contemplating the latter category, we have been known to console ourselves by turning to that page of the Official Baseball Encyclopedia which tells us that Babe Ruth for many years held the major-league record for career strikeouts. One of the things we have always tried to do in the process of forecasting is to suggest, along with each forecast, a relative degree of certainty. The word relative deserves emphasis since, in this trade, the certamty of any forecast is invariably a considerable order of magnitude below 100. We are perfectly willing to admit that this degree of cert'ainty often falls sufficiently low to make an opinion vulnerable to accusations of hedging. The relative veniality of this sin in comparison to the strikeout is a matter best left to the reader's opinion. All of which brings us to a discussion of the formulation of investment policy as we enter the second half of 1982. It is a period in which the market has declined sufficiently to make I–'-'–s,aoef,ec..tQe statem'lnt thatH!8119.81lwill,.be…known,–histor.ically-. as a beap – markeL . 0 1' the -pasl,t—lF-. three quarters that bear market has posted three recognizable lows, in terms of the Dow, 824.01 on September 25, 795.47 on March 8, and 788.62 on June 18. It remains, of course, a possibility that the last one will, historically, come to be known as the bear- market low. It also, obviously, remains possible that one or more lower lows will be scored before the whole dreary process is over. On this subject, we resolutely refuse to issue a forecast since, in our view, the degree of certainty would be so low as to approach being nil. Now in line with the distinction discussed above, even the foregoing statement could constitute an investment-policy tool. Since the level of the ultimate low is uncertain, it may be argued, Why not simply remain invested in cash equivalents, which are currently providing record real rates of return In answer to this argument, a number of other quaSi-forecasts must be trotted out. One of these' is that we do not forecast disaster. There are those commentators who, re- calling that Ruth is remembered for home runs while his strikeouts are forgotten, tend toward a compulsion to swing for the fences. Currently, most of the brothers of this lodge are com- peting to see who can cite the lowest downside objective for the Dow. By contrast, our own analysis of individual stock patterns suggests that the risk of common-stock ownership at the moment is relatively low, and certainly unlikely to be greater than the risk normally attendant upon such ownership. Secondly, as we have repeatedly suggested, we think the current market cycle relatively mature, so that any low posted is likely to be scored soon — in our own view well before the end of 1982. Finally, as we attempted to suggest last week, on a — —long-term basis the market's internal – —- technical -.- co..ndi-tion is one of being —- rather deeply oversold. Given the above facts, it is only necessary to combine them with the demonstrable fact that the most generous returns afforded by equities are those which are earned shortly after major-cycle upside turning points. This, in our view, argues persuasively in favor of an investment policy increasingly tilted toward common stocks. AWTrs Dow-Jones Industrials (12 00 p. m.) 796.52 S & P Composite (1200 p.m. 107.73 Cumulative Index (7/1/82 1078.27 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL No statement or expreulon of opinion or any other matter here,n contained IS, or IS to be deemed to be, directly or indirectly, on offer or the sollc.lollon of on offer 10 buy or sell any security referred to or mentioned The motter 15 presented merely for Ihe convenience of the subSCriber Whde He believe the sourct's of our Informa han 10 be rehable, we In no way represeflt or guarantee the accurocy Inurea! nor of the &lolemenl5 mude herem Any cctlon to be token by the subscriber hould be bosed on hiS own IIweshgotlon and Informanan Janney Montgomery Scott, nc, as ( corporation, ond liS orflcers or employees, may now /love, or may later fake, poSitions or trodes In respect to any securities mentioned In thl or any future Issue, and such pOSition moy be different from any vIews now or hereafter expressed In thIS or any other Iue Janney Montgomery Scott, Inc, whICh 1 regIstered with the SEC as on Investment adVIsor, may gIve adVICe to Its Investment adVIsory and othel customers Independently of any statemenls mode 11'1 thIS or In any other Issue further InformatIon on any security mentIoned herem IS available on request

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Tabell’s Market Letter – July 09, 1982

Tabell’s Market Letter – July 09, 1982

Tabell's Market Letter - July 09, 1982
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IrArBlIELL'S &IRlc(IEIr L I E T T ( E IRl 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIV'SION OF MEMBER New YORK STOCK EXCHANoe, INC. MEMBER AMERICAN STOCK EXCHANGE – … rHose';'WiiOliavif6een IoIIowing our tecn-niCal comments onJuthlye a9c. flo1n,;o9!t!-8th2;e.stOckm,'a!r'RSet-'nCav-e-,–,,-….-,-, we hope, been able to infer our belief that its behavior is, at least, unusual and to some extent unpre- cedented. What we have had. for some nine months now. is a stock market which, while it has stubborn- ly refused to go uP. has not. on the whole. declined all that much. This behavior tends to produce a certain disorientation on the part of those of us who have observed the stock-market scene for the past three decades. We are accustomed to markets which. with at least some degree of directness. proceed to wherever they are going and then, rather quickly. reverse course and. correcting the excesses of the prior swing, move in the opposite direction. This. of course, is totally non-descriptive of the market's behavior since last September. Another unprecedented factor on the financial scene has been the current level of interest rates. Fixed-income returns in the vicinity of 15 — a rate, be it remembered, at which money doubles every five years — are totally outsIde the realm of experience of anyone currently in the securities business. Since we are currently experiencing two items essentially without precedent, there has existed' a tendency to link them together — witness Thursday's market in which a sharp rally in the bull market stimulated a like reversal in stocks. This linkage has led to three pieces of conventional wisdom regarding interest rates and the stock market which may be summarized as follows 1. There exists a so-called real interest rate. supposedly relatively stable. which can be computed by subtracting from nominal rates something called inflationary expecta- tions for which past inflation is often used as a proxy. With inflation, at least over the past nine months, slgnificantly below previous experience, this theoretical real interest rate is now approaching record levels. It is thus concluded that either inflation at the 1970's rate will reemerge or that interest rates will shortly decline. 2. The pernicious effect of high interest rates, especially on such economic sectors as the housing market is well known, and recovery from the present recession is, t-1I-!..th;;er;e;or;e;, impossible until rates come down. This js a view that has been repeatedIY'- expressed -iilOl'fiClRl Washmgton CIrcles. 3. Stock market recovery is impossible until such time as interest rates, which provide competition for potential equity money, move Significantly lower. Our view is that all of the above three pieces of conventional wisdom are demonstrably false. The real-interest-rate theory is one beloved by economists, who, for some 50 years, have es- poused it based on a priori reasoning that this is the way interest rates should behave. It has recently been reenforced by the a posteriori fact that. for the past 25 years or so. this is how they have. in fact. behaved. Over that quarter-century. both interest rates and inflation have been rising. but the lesson. taught in Statistics I. that correlation does not imply causation has apparently been lost. When one examines the relationship of interest rates and inflation from the Declaration of Independence to the mid-1950's the correlation vanishes into thin air. The real interest rate has in fact varied widely. and it is quite possible to find protracted periods during which it remained. for much of the time. not all that different from levels currently prevailing. As far as the necessity of lower interest rates as a precondition for economic recovery is con- cerned. this also tends to vanish in the light of historical reality. There exist numerous periods on record when vigorous economic expansion has gone on totally Oblivious to high interest rates. What high rat es do accomplish is to shift benefits from one group of beneficiaries to another. It is hard to argue that savers (not a miniscule group considering the 200 billion in money funds) are being destroyed by high interest rates. Borrowers, particularly recent mortgage borrowers, or those overextended, i.e., Braniff, are, quite obviously, hurt. However, it is hard to argue that a home, in addition to providing shelter. should simulataneously provide instantaneous riches. and the penalties for improvidence in a free market have always been, and probably should be, harsh. As far as the third conclusion is concerned. it is again demonstrable that high real rates of inter- est have existed concurrently with some of the largest bull markets of the past 200 years. Analysts who correlate interest rates with the stock market have a tendecy to view both stocks-.and senior securities – IL as similar financial instruments, -both purchased with an eye toward financial return properly adjusted for risk. This is, at best, an inadequate explanation of what motivates investors to buy common stocks. This. however. is sufficiently complex to be the subject of another letter. What is, in our view, unsustainable over the next ten years is the continuance of a 1970's rate of inflation. This is something that the record tells us has never occurred and which current political auguries suggest that the American people quite simply will not put- up with. Periods of relative price stability following long rises in prices in the past. have been regularly accompanied by relatively high real interest rates. suggesting that those who are forecasting Significantly lower rates at any time during the near future may well be misled. What such periods do tend to produce is sharply rising stock prices. The impossible combination, i.e., a rising stock market accompanied by continuing high interest rates, is something that historical analysis with a sufficiently long perspective tells us is not only a possibility' but a probability. Dow-Jones Industrials (12 00 p.m.) 808.89 S & P Composite (1200 p.m.) 108.20 ANTHONY W. TABELL DELAFIELD. HARVEY. TABELL Cumulative Index (7.8.82) 1070.63 No statement or e)(preUlon of opInion or any other moiler herein conTained Is, or IS 10 be deemed TO be, directly or mdlrectly, an offer or The SOIICITat,,,;- f an offer to buy or sell any security referred to or mentioned The molter IS preented merely for the convenience of the subscriber While -Ne believe the sources of our formahan to be reliable. we In no way represent or guarantee the accuracy thereof nor of ,Ihe statements mude herein Any octlon to be token by the subSCriber should be based on hiS own mvestlgatlon and Informotlon Jonney Montgomery Scott, Inc, as a corporaTion, and Its officers or employees, may now have, or may later toke, pOltlons or trades 1M respect to any seCUrities mentioned In thiS or any future Issue, and such position may be different from ony views now or hereafter e)(pressed In thiS or any other 1Ue, Janney Montgomery Scott, Inc, which IS registered With the SEC as on investment advisor, may give adVice to Its Investment advisory and other customers Independently of any statements mode rn thiS or In any other Issue Funher Informtlon on ony securoty mentioned herein IS available on request

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Tabell’s Market Letter – July 16, 1982

Tabell’s Market Letter – July 16, 1982

Tabell's Market Letter - July 16, 1982
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TABELL'S MARKET LETTER 909 STATE ROAO, PRINCETON, NEW JERSEY OB540 DIVISION OF MEMBER NEW YORK STOCK EXCHANoe, INC MEMBER AMERICAN STOCK EXCHANGE July 16, 1982 It may be nothing more than the summer rally, a seasonal phenomenon which cannot have -gone unremarked-by….egu!ur read1lr1POf 'thiB'-leHer7but-heock-maI'ket-celebrated..,the-4th -OfJ uly – -.— or at least the post Independence Day period — by- ijutting on its'own '-fir'eworks -display. If the display was somewhat less than spectacular than those of us with long memories recall and would like to have seen, it was at least somewhat better than the continuous fizzle which characterized the first half of 1982. Anyone who tri'3s to read the classic signs of a take-off rally into the last couple of weeks action is. it must be said, wearing glasses of a definite roseate hue. The 1118 advances chalked up on July 9 and the 1061 rising stocks of June 12 fall far short of the sort of breadth statistics needed to get the juices really flowing. Likewise, although July 12 provided the third highest first hour on record, its final total of just under 75 million shares was still only 1. 4 times what volume had been averaging for the past 25 days. The parameters for this statistic, it will be recalled, are that 1. 5 is a mildly encouraging level, and something over 2.0 is required to produce wild excitement. Nonetheless, after reaching its last low of 795.57 on June 9, the Dow was up some 30 points from what can be considered a successful test of that low at 796.99 on the Friday prior to the 4th-ofJuly Holiday. It is true that the stock market exhibits repetitive behavior patterns, and, indeed, if this were not so, we technicians would have to find respectable employment. Nonetheless, subtle new differences do emerge over time, and we are getting to be at least receptive to the idea that some such differences may be emerging in 1981-1982. It is, for example, quite easy to identify the culprit which caused the admittedly-crummy breadth action, as the market turned On heavy volume at the end of last week and the beginning of this. That culprit was the Oil group, abetted, to a lesser extent, by other natural resource stocks. On the day the market staged its dramatic intraday turn, most domestic oils wourd up posting multi-point declines. This should not have been too -surprising ince-uils-have-been-mildly-out-of-gear-wiHlt-oo-arl,et fep 'almest–twe..s.-In-gener—-I ai, most issues topped in November, 1980 well before the Dow's peak in April, 1981. They were the downside leaders in the 1981-82 bear market, obscuring at least mildly respectable performances by fairly large groups of other issues. In a way this fact is not even new. Rigorous academic studies have proved oils, as a group, tend to display relatively low covariance with the rest of the market and have done so over a multi-decade period. The disparity, however, appears especially noticable in the past couple of years. Meanwhile, if the market is failing to display the classic signs of an irrational-panic, oversold condition followed by a takeoff rebound that we, and many other technicians, are hoping for, it continues, at the very least, to set new records for remaining oversold for a protracted period of time. We noted in this space two weeks ago the fact that the Dow has remained in the lower portion of its 200-day range for near record lengths of time. Another measure of the market's extended oversold condition can be found in the statistics on new highs and new lows. Back in early October, 1981 706 issues posted new 52-week lows, a number constituting just over 33 of all issues traded. The low of March saw 451 new weekly lows and June's figure was 349. This week will constitute the 40th consecutive week in which weekly new lows as a percentage of issues traded refused to post a new peak. Now this is, of course, a common happening when the market is advancing. However, it is fairly rare during bear-market periods, which can be defined, using high-low statistics, as periods where new highs never reach more than 10 percent of all issues traded. The latter has also been true since last October. It is the longest consecutive period that both conditions have remained true in the past 40 years. It is, in fact, only the seventh occurrence since 1942 where the condition has persisted for 30 weeks or longer. Of the 'previous ones -it 'should be 'noted -that -five 'were -associated' with major bear-market bottoms, 1942, 1946, 1953, 1962, and 1970. The other occurred following the Halloween Massacre of 1978, a unique phenomenon which, while intermediate-term, possessed many of the qualities of a bear market. There is, in summary, going to be no pronouncement from this quarter that the market has achieved its ultimate low. It mayor may not have done so. It seems to us, however, that the preconditions for such an event are indeed present, and it is likely that overly scrupulous attempts at pinpoint timing will, at this stage, be a somewhat unrewarding exercise. AWTrs ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL DOW-Jones Industrials (1200 p.m.) 826.10 S & P Composite (1200 p.m.) 110.31 Cumulative Index (7/15/82) 1091.72 No stolement or expression of opinion or any other moiler herCln contolned 15, or IS to be deemed to be, directly or indirectly, on offer or Ihe sol,e.lot,r' Of on offer to buy or 5ell any secunty referrl!'d to or mentioned The mailer IS presented merely for The convenience of Ihe subscriber While '0 believe the sources of our Informahon 10 be reliable, we In no way represent or guarantee the accuraty thereof nor of the statements mude herein Any octlon to be token by the subscriber should be based on hiS own investigation and Informatron Janney Montgomery SCali, Inc, as a corporation, and Its officers or employees, moy now have, or may later Toke, P051trons or trades In respect to any securrtles mentioned In thiS or any future Issue, and such pOSitron may be different from any VIIlWS now or hereafter expressed In ThiS or any other Issue Janney Montgomery Scott, Inc, which 15 registered With the SEC as an Inestment advisor, may give adVice to lis Investment adVisory and other customers Independently of any statements mode In thiS or In any other Issue Further information on any security mentioned herein IS ovorlable on request

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Tabell’s Market Letter – July 30, 1982

Tabell’s Market Letter – July 30, 1982

Tabell's Market Letter - July 30, 1982
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TABELL'S MARKET LETTER 909 STATe ROAD, PRiNCETON. NEW .JERSEY 08540 DIVISION OF MEMBER NEW VORl(. STOCK EXCHANGe, INC. '-'EMBER AMERICAN STOCK EXCHANQE – I.,…….. –…,.L-'.,….; The' month ofiily lias featured7notlier 'One -o'f'tlfose-rounJdu-ltyrip3s0-,whi1c9h82have-been.uf-l.,Uf.'tratinll;.–lr investors for the better part of the past year. In terms of the Dow Jones Industrial A'verage aftr testing the bear-market low (788.62 on June 18) at a level of 796.99 on July 2, the market, ';'as able to stage a modestly respectable rally reaching a closing peak of 833.43 on July 20. Since that time, in six consecutive trading sessions of losses, just about the entire gain has been given up with the average having reached an intra-day low of 801. 46 on Thursday. This action is, in our view, moderately disturbing for the short term but not necessarily all that important insofar as our longer term view of the market is concerned. That view can be re- stated quite simply. It is and has been that we expect a major cyclical low to be posted sometime prior to the end of 1982, probably no later than early this Fall. There have been three major attempts so far to score such a low in September, 1981, March, 1982, and June, 1982. All three of these attempts were, at roughly the same level, just under 800. We do not look for any future low to penetrate significantly below that level, although such a low could well be modestly lower. Our view of the September-to-date process, then, is that it constitutes a base formation — not a pre- lude to disaster. At the same time it must be noted that at no time since last September has the market present- ed any evidence of scoring a terminal bottom nor has it demonstrated any worthwhile rallying tend- ency. As noted above, the aborted July advance is simply another one of a series of failures on the part of the market to demonstrate any sort of significant upside breadth or vigor. Indeed, the latest burnout can conceivably be viewed as an indication that the final downward probe in the on- going base-formation process may be delayed until September or October. This pn.ihHit,, is underscored by the fact that the reversal occurred in July, traditionally a We have noted in the pa that, of the 12 calendar months, onl Sept- ember and December appear to have highl. ;, ne . ''' latter upward. The tendency toward a rally during the Summer is, however, at least, moderately pronounced. Of 56 Julys since 1926, the market, as measured by the Dow, hfs advanced in 36 and declined in 20. The average change for the 56 Julys has been 1.88 which is the largest average change for any of the 12 months. The month's past history of showing an advance 64 of the time is second only to the record of December. It is also possible, unfortunately, to draw some tentative conclusions from the failure of the expected July rally to materialize in 1982. A good July has, in the past, tended to be a fairly decent harbinger of things to come. There have, for example, been 15 cases since 1926 when July showed an advance of 5 or greater. In 12 of the 15 years that such was the case, the Dow subse- quently posted an advance from the July close through the December close. Indeed, in only one case, 1937, did a strong July rally lead to a significantly weaker market. In that year a 9.62 advance in July was followed by a 35 collapse over the rest of the year. With that exception, the worst subsequent performance was a decline of just over 6. The average change in the Dow for the final five months of those 15 has been 4.35, three times as great as the 1. 63 average for all five-month periodS starting in August, 1926. On the other hand, a July failure such as the one we have, this year, experienced, tends to augur considerably less well as far as the rest of the year is concerned. There have been 26 years in the past 56 where the July advance was 2 or less or where July posted a decline. Subsequent five-month action shows an only slightly-better-than-even record, the market having advanced in these cases 14 times and declined 12 times. This is a fairly disappointing performance conSidering the fact that, overall, the market has shown 35 advances and 21 declines over the final five months anof the .year. The average performance for the 21 five-month periods following a weak July has been a miniscule advance of 08 versus average advance for-56 years'Of1736;- – – ,– – – – Another way of looking at the same numbers above is to say that, of 21 instances where the market declined between the end of July and the end of December in the past 56 years, only three, or 14, were proceeded by a July advance of 5 or greater, while 12, or 57, were preceded by a weak advance, such as the one that occurred this year. Now, as we noted above, we are not here forecasting significantly lower levels. As we have been suggesting, cycle theory strongly suggests that, even if the December close is lower than today's, the market, at that stage, will already have bottomed. It is difficult, however, to view July's action as being other than disappointing in a near-term sense. AWT rs Dow-Jones Industrials (1200 p.m.) S II P Composite (1200 p.m.) Cumulative Index (7/29/82) 813.17 107.63 1076.61 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No staTemenT or expressIon of opinion or any other malter here'n contOlned IS, or 15 10 be deemed 10 be, directly or Indlrlc'ly, on offer or the SOI'C,lollon of on offer 10 buy or seH ony security referred 10 or metltloned The moiler 1 presented merely for Ihe convenience of the subSCriber WhIle we believe Ihe sources of our .tlformolion 10 be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mode herein Any action 10 be loen by the subSCriber should be based on hiS own rnvestlgohon and rnformot,on Janney Montgomery Scott, Inc, as a corporatIon, and ,Is offIcers or tmployees, may now hove, or may laler loke, pos1tlon or Ifode In respllct loony seeu(l!l(!S menlloned In In,s or any future Issue, ond such position moy be different from ony ….,ews now or nereolter exprl'ssed In thiS or ony otner Issue Jonney Montgomery Seoll, Inc. , wnlen IS registered wltn the SEC as on Investment adVisor, moy give adVice to lIS Invelment adVisory and othel CUltomer1 mdependenlly of any statements mode In thiS or many otner ISsue Furtner information on ony security mentioned nereln IS ovolloble on request -,

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