Viewing Month: November 1982

Tabell’s Market Letter – November 05, 1982

Tabell’s Market Letter – November 05, 1982

Tabell's Market Letter - November 05, 1982
View Text Version (OCR)

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08!540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE – .. !..-.. r'f – – -…… VIi – – – – – – – I -II Nber-5-;T982—–.—.–…. As wns eminently predlctnble. the finnnciul press went bananas on Thursday, heralding the fact that the DOW-Jones Industrials had achieved n newall-time high. exceeding the closing (and also the hourly and intrndny) figure for January 11, 1973. We were also duly mformed that, in the process, the Dow chalked up its largest (points not percentage) gain on record, moving ahead 43.41 points on Wednesday. While these pieces of information may have the salutary effect of providing filler for newspaper space, they are, as far as the Investor is concerned. about 3G close to useless as it is nossIble to t!'et. That investor remruns faced wIth his perennial problem. What, given this action, becomes the proper attitude toward the stock market As an aid in this dilemma J two basIc principles of technical analysis emerge as relevant. They are as follows 1. Great stock-market strength is usually a precursor — not of immInent weakness — but of still further strength. 2. Major market cycles, once underway, tend to persist for long periods of time. We discussed some of the figures leading to the first conclusion in our letter of October 1. At that tIme, we cited the fact that bull markets tend to be characterized by sharp and volatile take-off rallies which proceed without a correction of as much as 5. Since then, it has, of course, become obvious that the take-off rally began with the actual low on August 12 (this is not always the case) and h s to date, remamed m effect, with a 37.1 advance so far. It has thus exceeded the comparable taIe-off rally for the last bull market, 1978-1981, which was only 16.8 and, for that matter, the 22 take-off rally of the 1966-1968 bull market. It has, however, challed up just about the same percentage advance as the 1962 and 1974 take-off rallies (30.3 and 32.5 resectively), and it still falls significantly short of the fi!'ures for four other bull markets since World War II. which have seen take-off rallies of as much as 60. It must also be recalled that such initial rallies tend to be only the first phases of bull markets which, . once the initial rallies are comolete continue to proceedsimtificantly higher, albeiC at a slower rate with somewhat larger and longer corrections.- – – – – – r … – As far .as time is concered, fully realizing we are repeating ourselves, it is worthwhile once again to hamer away t some obVious ;facts of stock-market cycles. The current market cycle, it must be remembered, is still just 12 weeks old. Typical cycles, we remind our readers once again, last just under four years from low to low, based on the record of 23 such completed cycles since 1896. This suggests that, if the current cycle conforms to the averarre, the next major stock-market low will not be seen until Mav, 1986. There are, furthermore, only three exceutions in the 23 past instances to the !,eneral rule that such cycles spend at least 50 of their time advRJ1cing, indeed, on average, some 60. Again, ability to achieve this average in the present case would produce a 27-month advance, and the target date for the next major high would be December, 1984. Now despite the fact that the above two precepts are clearly implied by an historical record stretch- ing back almost a century, most investors, we think ,intuitively feel that somehow it will all be different this time. Undoubtedly most investors felt the same way at comparable stages of the 23 previous cycles, which is, of course, why the cycles tend to manifest themselves in the first place. There is, of course, little doubt that part of the steepness of the recent rise can be attributed, not to secular trend, but to a recent increase in volatility. This volatility will, no doubt, lead to some short, sharp corrections as it did a week ago Monday and this Thursday afternoon. Such corrections will undoubtedly continue to en- gender the feeling that the whole process may be over, an event which, as we noted, is unlikely to occur for another two years. It is possible to make some projections regarding the extent of this particular take-off rally although such projections are far less important than recognition of the rally for what it is. A logical, medium- term uoside tarl!et for the Dow would be aooroximatelv 1130, following which it would be logical to expect a more protracted, although certainly by no means final, market correction. It is possible to make such a guess on the assumption that what has happened since August of this year constitutes the initial advance in. almost. certainly , … arcycle-.-turn .and …….very. possibly. a rsuper-cycle ,turn. If this is 1 the ,case, …according to the Elliott Wave Principle and other models, such an advance should take place in five waves, three advances interspersed with two corrections. It is easy to demonstrate that four such waves have occured so far, the first from August 12 (776.92) to September 15 (930.46), the second to September 30 (896.25), the third to October 21 (1036.98), and the fourth to October 28 (990.99). The fIfth, It IS lOgICal to sur- mise, is currently under way from that level. ', Now if the above projections holds true, and it is, of course, subject to modification by events, even the correction following this rally should bottom at levels somewhat higher than present ones. The clear argument continues to be in favor of a fully-invested position. AWTrs ANTHONY W. T ABELL DELAFIELD, HARVEY, TABELL Dow-Jones Industrials (12 00 p. m.) 1052.61 S & P Composite (12 00 p.m.) 142.18 Cumulative Index (11/4/82) 1473.74 No statement or expression of opinion or any other moiler herein contained IS, or IS 10 be deemed to be, directly or Indlrec1ly, on offer or the 50licltotlon of on offer 10 buy or sell any security referred to Or mentioned The moiler 15 presented merely for the convenienCt; of the subscriber While we believe the sources of our Informa- han to be reliable, we In no way represent or guarantee the accurocy Ihereof nor at the stolemenls mude herein Any action to be token by the subSCriber should be based on h own Invesllgohon and Informohon Janney Montgomery Scali, Inc, os 0 corporation, and liS officers or employees, may now have, or may loter toe, pOSitions or trode, In respect to any securrtles mentioned In thl or any future Issue, and such POSition moy be diFferent rom any views now or hereafter exprened In Ih,s or any other Iue Janney Montgomery Scott, Inc, whICh 15 re91lered wllh the SEC as on Investment adVisor, may give ad…,ce to lIs ,nvestment adVisory and other customers ,ndependently of ony statements mode ,n thiS or In any other Issue Further ,nformat,on on any security mentioned herein IS available on request

Download PDF

Tabell’s Market Letter – November 12, 1982

Tabell’s Market Letter – November 12, 1982

Tabell's Market Letter - November 12, 1982
View Text Version (OCR)

TABELL'S MARKET LETTER , 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCI( EXCHANGe, INC MEMBER AMERICAN STOCK EXCHANGE i , '' .- , November,.,12,…1982 . .. We alludelllast week, to the fact that most investors, incor'ectly-in our Vlew, feel essentially un- comfortable with the current market due to the sharp upward adjustment in prices that has manifested itself over the past three months, Thus concern was being expressed this week about recent volatile intraday swings and the fact that no new high had been made since the last closing peak of 1069.45 was posted on the Dow on November 3. When one backs up a bit, the triviality of this concern becomes ap- parent. The market has gone all of seven trading days so far without the achievement of a new high and has posted a correction of a staggering 2.63. Now even the most fragmentary observation will re- veal that past bull lIarkets, even in their most dynamic phases, have gone considerably longer than seven trading days without a new high being posted and have been punctuated by corrections of consid- erably greater magnitude. We think it pointless to worry, therefore, about the ever-so-slight indications that the market is encountering a shade more difficulty in achieving upside progress than has been the case from August to date. Meanwhile, let us use the hiatus to examine what the market has, in fact, been doing over the past several months in terms of the semi-esoteric discipline of trend analysis. This analysis operates on an assumption, in contravention to one beloved by academicians, that the market is in fact imperfect in an economic sense — that it does not adjust instantaneously to new information, but instead is acted upon by forces which move in the direction of such an adjustment over time. It is, of course, never possible to know precisely the exact nature of these forces. The best one can do in an imperfect world is to produce estimates. It is, for example, a known fact that between August 12, 1982 and November 3, 1982 the Dow Jores Industrial Average moved from 776.92 to 1065.49. A line can be mathematically computed so as to be as close as possible to all of the closing Dow figures within that period. That line starts at 828.83 in mid- August and rises at a rate of 3.48 lloints per day. ILis also.possible to measure how much the actual figures have devated from this line.- This gauge is pro 'by something called the standard error of the estimate, and it is, in fact, 27 points. In normal cases, 95 of the actual observations will vary by no more than twice this figure in either direction from the line itself. It is thus possible to view action between August and November as an upward sloping channel some 108 points (4 times 27 points) wide. What we have so far is nothing more than an accurate description of what took place over a given period. It is of interest, however, to know whether what has since transpired remains consistent with that description. We can test this by projecting the channel out in time to the present day. Doing this, we find that, as of today, its outer limits are approximately 1000 and 1108. It is thus possible to make the statement that current market action remains consistent with the assumption that this trend, If the trend is projected further outward in time,it produces some pretty startling figures. Its central value in two weeks will be 1082, in a month, 1121, in six months, 1470 and in a year, 1888. These somewhat euphoric numbers suggest that the true force currently operating on the market possesses somewhat less of an upward bias than the current projection indicates. This is probably true. It is our practice to recompute the upward trend each time a new high is achieved. Usually, as this is done, the computed upward slope becomes less, and the standard error increases, thus providing less optimistic projections. It is possible, however, to achieve useful estimates of the forces acting on the market by using this method. It is also worth mentioning, while on the subject, the longer, super-cycle trend to which we have referred in the past and which has been in effect since the mid-1960's. This trend can be expressed as an extremely wide channel of about 350 points on the Dow with a current central value of 885 and outer limits of 1078 and 722. Since the mid-1960's, the Dow has been largely contained within this channel and indeed remains' in it, although currently flirting with the upper limit. IT) order to say with a great deal of certaintythat. that. trend ,was .no .longerin ,effect,a . good , deal of . further, strength .would,be .required'. Indeed, the Dow presently would have to move above the 1200 level. Between 1080 and 1200, there exists a gray zone. (For those familiar with statistics, this is the area above the computed regression line by between two and three times the standard error.) The trend would also be called into Question were the Dow to trade in this zone for a protracted period of time, in this instace, bemg as much as a year. Since this is' a not-impossible eventuality, considering the early stages of the upswing, it is a factor which will have to be watched. AWTrs ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL Dow Jones Industrials (1200 p.m.) 1051. 88 S & P Composite (1200 p.m.) 141. 08 Cumulative Index (11/11/82) 1505.36 No statement or expreS10n of opinion or Clny other matter herein onlOlned IS, or IS to be deemed to be, directly or indirectly, on offer or the soliCitation of an offer to buy or Sl!ti any security referred to or mentioned The mOiler IS presented merely for the convenience of the subSCriber Whdelle believe the sources of our informa- tion to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements mude herein Any action to be taken by the subSCriber should be based on hIS own Investlgallon and Information Janney Montgomery Scott, Inc, as a corporollon, and Its officers or employees, may now have, or may later take, poslhons or trades In respect to any secvrltles mentioned In thiS or any future Issue, and such pOSItIOn may be different from any vIews now or hereafter eJ(pressed In thiS or any other Issue Janney Montgomery Scali, Inc, which IS registered wilh the SEC as on Investment adVisor, may give adVice to Its Investment advls.ory and olhel customers Independently of any statements made In thiS or In any other Issue Further information on ony secuflty mentioned herein IS available on request

Download PDF

Tabell’s Market Letter – November 19, 1982

Tabell’s Market Letter – November 19, 1982

Tabell's Market Letter - November 19, 1982
View Text Version (OCR)

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY OB540 DIVISION OF MEMBER NEW VORK STOCK eXCHANGE. INC MEMBER AMERICAN STOCK EXCHANGE November 19,982 -I ThFsubjecto-CtliiSletter, and, we hope, a numberof follow.on-Ietters, will be-interest rates. Now this, we realize, constitutes another one of those introductory sentences perfectly calculated to send our readers into a state of utter torpor. Those readers will have been bombarded with enough esoteric discussions of this particular subject to have reached the point of utter satiety. Yet the statement, for this publication at least, has some degree of applicability. We have not mentioned interest rates, except in passing, for some three months. We doubt that many of our brethren in the financial-punditry field are able to make a similar statement. For indeed it has been just about impossible to find any financial commentary, in the daily press or elsewhere, over the past few months, that has not explained the action of the stock market, often solely, in terms of interest rates. We hear on one day that the White House (the White House) expects a drop in the discount rate, and the market goes up. The next day the rumor is denied, and the market promptly retreats. One would indeed suspect that market analysts have forgotten everything they had previously learned and have taken up Fed-watching as a full-time occupation. Prefering to concentrate on our own area of expertise, technical analysis, we have eschewed this particular sport and tried to stick to our knitting. The last time we did mention interest rates in this space was in the final paragraph of our letter of August 20. After voicing the opinion that the Dow had reached an effective bottom the week before, we said, Pay no attention to the- excuses. The factor widely cited as the reason for the rally was lower interest rates or, more properly, forecasted lower in- terest rates. This, of course is nonsense. The market went up quite simply because for some months now, it has been in a technical position to do so. Interest rate forecasts have come and gone throughout that period with little or no effect. n In retrospect, this would appear to rank as one of the more wildly incorrect pronouncements we have made in a long career of sticking out our neck. As we all know, since we penned those particular words, the Dow-Jones Industrial Average 1–Iows-ta;gtehde90ane-adra-rye-cTorredas3u7ry advance betwe BillYiela was e 9n. August12and Nov 51, Certificates of ember 3. Deposit r e On the turned day the mJlJkeLlIllldeits 12.25, and the Dow-Jones 20-Bond Average stood at 60.18. Today T-Bill. and CD yields have declined to 8.36 and 9.10, and the Dow bonds are at 71.10. Meanwhile, as noted above, almost all extant explanations for the stock-market rise have centered upon the concomitant fall in interest rates. After all of this, we still are not sure we want to apologize too strenUOUSly for our statement of last August. We will pmnulgate herewith two rules regarding the stock market and stock-market experts. The first rule is that nobody really knows exactly why the stock market behaves as it does day-to-Eiay. The second is that everyone thinks he does — or at least finds it his professional interest to pretend that such is the case. Thus since, over the past three months, the stock market has been rising and interest rates have been falling, the world's easiest cop-out has been to relate the two phenomena. The only trouble with this, is that, for those of us with long memories, it doesn't wash. Al- though one would scarcely believe it from the breathless commentary, there have been times in the past, other than the past three months, when the stock market has risen and risen quite substantially. There has, at those times, invariably existed a conventional wisdom which has informed us, with utter certainty, as to why the rise had been taking place. Those expbmations have varied widely from bull market to . bull market, and they have often, indeed most of the time, centered on factors other than interest rates. Indeed, some of us can remember when the stock market went UP in response to such things as steel pro- duction and carloadings. But we are giving away our age. It is not our intent to claim that there exists no relationship between interest rates and stock prices. Indeed, one can be demonstrated, but, in the process of such demonstration, it becomes appar- ent that the relationship is at best limited. This is an exercise we have engaged in in the past and one which we intend to reiterate in the sequels to this letter. A more fundamental difficulty is the fact that there exists no universal agreement on the funda- mental questions ofl why interest rates go up or down and what it means when they do. In this repect economists are' subject to the- same rules cited for' slockcmarket expertsab-ove. It is possible ,- for example, to cite at least four widely respected yet contending schools of economic thought which vouchsafe entire- ly different explanations for interest-rate phenomena. Recent published explanations have tended to bor- row freely from all of these schools, citing whichever one appeared to be most helpful in supporting the point the analyst was trying to prove. We think, in other words, that there remain pitfalls in a too-facile linkage of interest rates and the stock market. We will try to provide more concrete warning against these pitfalls in subsequent issues. AWTrs ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL Dow-Jones Industrials (1200 p.m.) 1033.38 S & P Composite (12 00 p.m.) 138.34 Cumulative Index (11/18/82 1489.73 No ,Iolemen or expreS'lon of opinion or any olner mailer herein contained Is, or IS to be deemed 10 be, directly or mdHedlr,' on offer or the sollCllallon of an offel 10 buy or II anr. security referred to or mentioned lhe matter IS presented merely for Ihe convenlen of Ihe subscllber Whl e -He belIeve the sources of our mlorma- han 10 be rel1ab e, we .n no way represent or guarantee the accuracy thereof nor of Ihe Slolements mude herem Any actIon 10 be laken by the subscllber should be bosed on his own mvestlgotlon ond Informollon Jonney Montgomery Scott, Inc, as a corporatIon, and Its offIcers or employees, may now hove, or moy laler lake, poslt.ons or trades In respect 10 any seculilies menlloned In thIS or any future Issue, ond such pOSItIon may be d,fferenl from ony vIews now or hereafler expressed In thIS or any other luue Janney Montgomery Scott, Inc., whIch IS regl!tered WIth the SEC -os on Illvestmellt odvlsor, moy 9,ve adVICe to lIs Inveslment adVISOry and olhel CVlomers mdependently of any statements mode In thIS or In any olher Issue Further InformatIon on any secullty mentIOned hereIn IS available on request

Download PDF

Tabell’s Market Letter – November 26, 1982

Tabell’s Market Letter – November 26, 1982

Tabell's Market Letter - November 26, 1982
View Text Version (OCR)

————————————————————————————-., TABELLS MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER New YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE It.7' .J November 26, 1982 — … We took the opportunity, last week, to launch a critique of the market's addiction—or at least market-letter writers' addiction—to the subject of interest rates. This turned out to be fortuitous, since this week's price behavior manifested mild withdrawal symptoms, the Dow responding to a lowered discount rate by moving below 1000 for the first time in over a month. To digress for a moment, the Dow level now of major significance from a technical point of view is 980. A move be- low that level, a possibility considered unlikely a couple of weeks ago, could suggest a correction of intermediate-term proportions. We concluded our comment of last week by suggesting that a fundamental diffIculty in tying market moves to interest rates stemmed from the fact that there existed no universal agreement on the basic question of why interest rates behave as they do. This disagreement extends to a number of related phenomena, also touching upon stock price movements, sup.h as inflation and the effects of substantial Federal deficits. Since market commentators tend to view these factors from wildly varying perspectives, it is perhaps worthwhile to enumerate those differing perspectives, to identify; in other words, t/1e various sets of players in the game. The first such school of thought may be called, simply, the old-time conventional wisdom. In this view, interest rates are simply a product of Federal Reserve policy, tight money meaning higher interest rates and easy money, lower. Deficits are said to produce higher rates, via the process of crowding out, government-financing demand excluding private borrowers from the marketplace. A contrasting school of thought, however, is the monetarist view. This school would admit that 1 n1. atstLe..JI1th(Ubort .run ,a Jl-t9ducL.2!..Fed P.9Jjcy.H9wever.,JtsdiB.QipJefLcontendthe–I intermediate-term effect is for easier money to produce increased business activity, consequent greater loan demand and, therefore, higher interest rates, rather than the lower rates which the conventional wisdom postulates. There is also implicitly a suggestion in monetarism that deficits are, per se, of little importa..'lce, monetary growth being the major factor in changing output and inflation levels. Part of the problem is that monetarists, a number of years ago, won a, victory, albeit an uneasy one, in the political arena. Thus, the Fed is now officially charged to use money-supply targets as a policy determinant, occasionally thereby producing policy moves which, in the conven- tional view above, have the effect of increasing interest-rate levels. This is part of the reason why WaH Street has developed a cottage industry of Fed-watching. There then exists the supply-side view, which has a status among economic schools of thought roughly akin to that of a small over-the-counter growth stock. This school is willing to live with deficits produced by tax cuts, on the theory that these cuts will, ultimately, stimulate economic activity and thus lead to hcreased revenues which will eliminate the deficit. As far as interest rates are concerned, this school leans heavily on an inflationary-expectations theory and now seems to be coming to embrace a gold standard (a subject we will not get into here) as the proper pre- scription for dullinp; those expectations. There remains finally, of interest at least to students of ancient history, the Keynesian view. Greybeards among us can remember when this view, outside of Wall Street at least, constituted the received word. This acceptance reached its apotheosis a decade or so ago when Richard Nixon, of all people, proclaimed, We are all Keynesians now. From that point on, the road has been downhill. InterestinOly enough, however, this view would find itself in agreement with the emerging supply-siders in minir.1izinr the importance of a prospective Federal deficit, albeit claiming that the – – beneficence of this deficit stems from an entirely different set of economic effects. Interest rates; then, are a'phenomenon' explained 'in widelydifferihg'Ways 'oy'div-erse groups of presumed experts, representatives of all of which hold tenure on the best faculties. It is, therefore. unsurprising that current commentary on the subject should be a Tower of Babel reflecting the various points of view of the commentators. It is the thesis we intend to develop that this cacophony represents a frail underpinning for a theory of stock market behavior. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWTlt Dow-Jones IndustrinIs (1200 p.m.) S & P Composite (1200 p,m.) Cumulative Index 11/24182 1005.05 134.49 1469.19 No statement or expreSSion of opinion or any olher moNer herein conlo,ed IS, or IS 10 be deemed to be directly or mdHectly on oHer or the SoliCitation of on offer to buy or sell any security referred to Of mentioned The moiler IS presented merely for Ihe convenlenc!; of the subscriber WhIle -He believe the sources of our Informo tlon to be reliable, we m no way reprerent or guarantee the accuracy thereof nor of the statements mude herem Any actIOn 10 be laken by the subscriber shOUld be based on hiS own ,vestlgolton and information Janney Montgomery Scott, Inc. as a corpora/lon, and lIS offuers or employees, may now have, at may later toke. poslttons or trades In respect to ony secunhes mentioned In thiS or any future Issue, and such POSition may be different from ony vIews now or hereofter epressed In this or any other Issue Janney Montgomery Scott, Inc, whICh IS registered With the SEC as on ,vestment odvisor, may give odvJCe to 115 ,vestment adVisory and othel customers Independently of ony stotements mode, Itns or ' any other ISsue Further Informahon on any secuflly mentioned herein Is available on request .

Download PDF