Tabell’s Market Letter – January 28, 1983

Tabell’s Market Letter – January 28, 1983

Tabell's Market Letter - January 28, 1983
View Text Version (OCR)

—- ;. TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBeR NEW YORk STOCK EXCHANGE. INC. MEMBER AMERICAN STOCK EXCHANGE January 28, 1983 To those who are fond of large numbers it was, we suppose, an interesting week. In Some r!'lPjl!l toa. strengthenL!91111l.J1Jldforcasts.oLhigher(or. at.Ieast.,…not .lower.)interest6rates, .,- the DolY gave up 30points at its worst levels of Mondaybefore– closlngW!th' i-23-point loss. After relatively indecisive action on Tuesday and Wednesday, Thursday saw a 25-point recovery whlch was being extended on Friday morning. The Monday drop saw 1632 declining issues thus making it by far the broadest fall to occur since the bull market began last August. All of this produced ample fodder for headline writers. From the point of view of the technician, however, the proper response to it all is So what It is, of course, the most difficult response for the market analyst to make. As ana- lyst ourselves, we are subject to the continual feeling that, in order to earn our keep, we ought to say something, preferably something different than what we said last week or the week before that. There were, accordingly, as the week wore on, the predictable forecasts of further market weak- ness, a commodity which, since we have seen precious little of it in the past six months, at least possesses the quality of being different. Much as we would like to say something new, however, we find ourselves unable to read all that much gravity into the present stock-market situation. Let us review for a moment precisely what has happened in recent weeks. At Monday's low, the Dow had declined some 5.69 over a two-week period. This did not even qualify as the largest decline since the market rise began, the Dow having dropped 6.31 between December 7 and December 16 and a bit more than that if one cares to measure that decline from the previous high back on November 3. This cur- rent, totally unspectacular drop took place from a new bull-market high achieved on January 10, a date which hardly qualifies as ancient history, having occurred just three weeks ago. Again, in November and December, we managed to survive all of two months without the market's achieving a new high, and we do not recall that particular period as having been one during which investors – -we.,e-dl'agged.,-kickin.g-and-seamin g ,off-totheioor.,.house. What has been happening since last November, of course, is the loss, by the market, of a fairly significant amount of upside momentum. This would hardly be surprising. Between August 12 and November 3, the Dow advanced 37 over 58 trading days. Were that rate of rise to have prevailed through today, the Dow would be at 1477. Bull markets are, of course, pleasant, but we think such a figure is a bit much to expect. What we are suggesting, of course, is that a loss of momentum at this stage, especially given the frenetic action of August, September, and October of last year, is a perfectly natural occurrence. While there appears to be ample evidence that the market's upward slope has dropped off sharply, there is little to suggest that that slope has changed direction. One of the oldest technical devices is, of course, a 200-day moving average, and we have no apologi.es about dragging it out, despite its antiquity. The reason this device has been used for so long is precisely because it has proved useful in smoothing out the short-term fluctuations in the market. During all major bear markets in the post-World War II period, a 200-day average, at some stage, turned down and the Dow itself moved below it. This generally occurrefi well after the high was reached but, in most cases at least, it occurred before the low. Such an event, properly interpreted, constitutes a final signal that preconditions for a bear market are present. It is worth recalling, therefore, where the 200-day average of the Dow is at the moment. It is, to be precise, around 921 or roughly ISO points below the Dow itself. Even more significant is the fact that today's average includes data as far back as April, 1982. Since these take-off figures for the average are a matter of past history, we are able to draw some tentative conclusions as to what the average is likely to do in the future. We know, for example, that between April and August of last year the market trended basically downward, and its subsequent recory .did not begin to approach current levels until October. It wo1l.ld be very difficult, therefore;-to sug' gest that this smoothed curve will likely turn down much before late this summer. The very reason that a smoothed curve of as long as 200 days is useful is that major market tops, when they form, tend to do so slowly. There has been some suggestion in rp(,pnt P. of a change in this tendency, but not, we think, a significant one. It is possible that a top of intermediate-scale proportions is in the process of formation, although we remain skeptical even of this possibility. If such is the case, however, its completion will require a good deal more time. AWTrs ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL Dow-Jones Industrials (12 00 p. m. ) 1071.10 S & P Composite (12 00 p.m.) 145.17 Cumulative Index (1127/83) 1607.93 No stotemen or expreslon of Opinion or any other motter herein contolned Is, or IS to be deemed 10 be, directly or tndtrectlr,. on offer or the soliCitation of on offer to buy or sell any security referred to or mentioned The mot'er IS presented merely for the convenience of the subSCriber Whl e we belteve the sources of our mformo tlon to be reliable, we m no way represent or guarantee the accuracy thereof nor of the statements mude herein Any achon to be token by the subSCriber should be based on h,s own Investlgotlon and mformatlon Janney Montgomery Scott, Inc, as a corporatIon, and Its offlc.ers or employees, moy now have, or may later toke, pos.tlons or trades m respect to any Cc.untles mentioned .n thIS or any future Issue, and such pOSItIon may be ddferent from ol\y vIews now or hereaher expressed In thIS or any other Issue, Janney Montgomery Scott, Inc, whIch 15 regIstered WIth the SEC as an mvestment adVisor, may gIve adVice to lIs .nvestment adVISOry and othel customer, ,ndependently of any IOtatemenlS mode m IhlS or m any other Issue Further mformotlon on any seC\mty mentIoned hereIn IS ovalloble on request

Download PDF