Tabell’s Market Letter – January 13, 1983

-, TABELL'S MARKET LETTER I 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE January 13, 1983 s there any pomt to WhICh you would WIsh to draw my attention' . –.–'To .., thUlO s tt!ci de n!.0 f,..t e….gJO.Jrt;JI t)—ngJ!tt ime '….,. …..,,' . –.- 'The dog. did,nothing in the mght-t1me' I , , .. M … -. r …. 'That was the curious inc1dent,) remarked Sherlock Holmes. II S,r Arthur Conan Doyle, Silver Blaze We have used the above quotation many times in this space over the years,and the reason therefor goes beyond the fact that we are Sherlock Holmes buffs. The moral that it evokes is probably applica- ble to formulating a forecast during most of the life of a typical stock-market cycle, and is particularly germane at a time like the present. The context from WhICh the quotation IS extracted involved the fail- ure of a watch-dog to bark during the night on which a crime took place. From this, the great detective was able to deduce that no unusual incident had taken place on the night in question. The point was that this very lack of an unusual incident itself constituted a useful piece of information. in this case. the fact that the perpetrator was a familiar figure. The fact is that very often — probably two-thirds to three-quarters of the time — the most import- ant possible stock-market clue is provided by the fact that no unusual incident is taking place. Let us examine the present instance. We are, we think it axiomatic, in a bull market or, in any case, were in one as of that one bright shining moment around 2 30 on Wednesday when the Dow, in a flirtation with a brand new round figure, swung momentarily above 11)0. It is an intellectual necessity to accept this fact as given, despite the fact that there may be those who are stlll fighting it. A market that has moved up 41 over a five-month perIod is by definition a bull market. Period. On to the next step. Having arrived at this stage J it becomes incumbent upon the technician to drag out a whole arsenal of indicators, many of WhICh W'lre gathering dust in the closet over the past four or five years. These are the indIca- tors normally associated with the identification of market tops. Almost all of these indicators are now be- haVIng absolutely like Holmes' dog in the night -tIme. They are doing nothing. This lack of indication, in other words J results in a positive clue that the market is likely to continue to move higher. 1–I–,uCi'reWo;emmcoieted'n-solmmewnoifcnthweseentinsdmicliantgorsmeinrr last week's ily along to letter. One family' consists oLmarKeLbr.eadthmeas– new bull market highs–coincident with the major aver- I ages attaining those highs last week. A whole host of others could be added to the litany. New highs continue to expand satisfactorily; group momentum appears positive, and dollar-flow measurements appear to suggest a presently inexhaustable supply of buying power. One would expect that five months into a rIse there might be a significant number of potential distributional formations in individual stocks. These are beginning to present themselves, but in paltry amounts that make vulnerable patterns seem as rare as diamonds. No dog is barking in the night-tIme to warn us of any condition other than the early stages of a buH market. We can describe the process of operating an investment portfolio under such condItions by resurrect- ing an eight-year old quotation from this letter. It appeared on March 19, 1971, at which pomt, we now know, we were in a bull market then some seven months old. We said then' IIPortfoIio management in a bull market, it seems to us, is much like driving a car at night. The headlights allow a limited vision of the road ahead and, as long as it is clear, the traveller proceeds in relative serenity. Quite obviously he remains alert, but, were he continually to worry about obstacles just beyond the range of the headlIghts, he would turn himself quickly into a nervous wreck. At the moment, all technical signals suggest that the stock market road ahead is clear, and the investor who worries about what might happen beyond his field of vision is dissipating a good deal of intellectual ener- gy that could better be applied elsewhere. We think it obvious that the same sort of condition. as far as the market's techmcal position is con- cerned. applies today. We still find ourselves being asked what sorts of deterioration or unfavorable developments might emerge to upset our optimistic prognosis. The fact that such questions are still being posed is indeed the best indicator of the marketls remaining upside potential. Questions about deteriora- tIOn are usually uncommon in the area of market tops. One sort of deterIoration, of course, would be 3 move by the Dow deep back Into the late 980-1070 trading range, suggesting that the recent upside breakout was false. We frankly do not regard this as a hkelyeventuality Paradoxically the first thing that the market has to do to show deterioration is-to – post a decline of some magnitude. This of course. It has not done SInce August. Were It to do so. It would then possess a tlbenchmark and could apply the standard technical tests to the subsequent rnlIy. This procedure would not work, of course, If markets tended to turn on a dime, nnd reverse themselves immediately. A study of the historical record, however, teaches us that thIS is precisely not what they tend to do What we are saying, In other words, 1S that any development WhICh might cmerge to upset the opti- mistic scenario would require tIme, atd we would ap!1enr at the moment to have time on our side. We nre five months Into an upswing WhlCh, absent unusual conditIons. should have r\ lIfespan of two to three years. Should such unusual conditions emerge, we will, we hope. be able to rccognize them md act ac- cordingly. MeanwhIle. the investor should devote his energy to selecting those stOCkR. bcst cnlculated to provide the capItal enhancement available under bul1-fl'lllrket condItions. Dow-Jones Industrials (1200 p.m.) S & P CompOSIte (12'00 p.m.) Cumulative Index (1/13/83) 1081.22 146.76 160876 ANTHONY W. TABEl.L DELAFIELD. HARVEY. TABELL No statement or expressron of oprnlon or any other molter herern contolned rs, or 1 to be deemed to be, drrectly or rndrrectly, on offer or the .solrcrtollon of on offer to buy or sell ony security referled to or mentIOned The motter rs presented merely for the convenrenCll of the subscriber Whrle Ne belIeve the sources of our mformatlon to be relloble, we III no woy represent or guarantee the occurocy thereof nor of the statements mude herern Any actIon to be token by the subscriber should be based on hrs own rnvestlgotron ond Informotron Jonney Montgomery Seoll, Inc, os 0 corporotron, and rlS offrcers or employees, may now hove, or moy loter toke, posrtron or 'rodes m respect '0 ony securrtles meniloned In thrs or ony future ISUe, and such posrtron may be different from ony views now or hereofter epressed m thl' or any ather luue Janney Montgomery Seoll, Inc, which IS regrstered Wllh the SEC os an IIlvestment advrsor, may grve odvrce to rts rnvestment advrsory ond other customers Independently of ony statemena made m ttlrs Of In ony other rssue Further rnformatron on ony securrty mentroned herern IS avarloble on requel.t