Tabell’s Market Letter – December 23, 1983

Tabell’s Market Letter – December 23, 1983

Tabell's Market Letter - December 23, 1983
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— TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC.' MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC. (609) 9249660 —;r—- … h!t. – ,.. – — ecembgr …23. !,,193 , As we iioted A last week, the time has arrived for our customary year-end -forecast,. and we find the crystal ball for 1984 a bit more clouded than was the case a year ago. At that time, the occurrence of a typical bull-market takeoff in August, 1982 was well documented, and we were thus able to fore- cast, with the Dow at 1041, that 1983 will be a good market year. We noted that there exist reason- able upside targets in the mid-1300's and that the Dow, by the end of 1983, could well have made substantial progress toward that goal. With an intra-day high of 1296.95 having been attained last month, that particular projection wound up reasonably close to the mark. This year, as noted, presents a more difficult case. In our review last week, we summarized market action from August, 1982 through June, 1983 as being the typical fabric of a bull market. The problem in looking ahead to next year lies in interpreting the desultory action which has occurred since that time. Either the second-half drabness is simply a necessary corrective process to the upside fire- works which preceded it or a top formation of some importance. We are, in other words, approaching the fundamental question, What are the probabilities that the bull market is effectively over. It is always necessary to look at market swings in terms of both time and amplitude. From the former perspective, it seems highly unlikely that the upswing which began in August, 1982 should be coming to an end at this early stage. From the latter point of view, however, the prospect appears more plausible. Let us summarize where we stand today. August, 1982 began the 24th major stock- market cycle since 1896. As of December, 1983, it is only 16 months old and the average length of such cycles, measured, remember, low to low, is 45 months, with the shortest on record being 26 months. The Dow to date has advanced for only 15 months, and there exist only four cycles out of the previous 23, none since 1938, where the total number of advancing months has been less than 15. The shortest post-World-War-II advancing phase was 26 months, beginning in October, 1966. Moreover, the cycle, minimallvL.should spend 55-60 of its life (as much as 90) advancing. If the 15-month advance so far means the 'cycle is more tllan half over, It woula-15e one ofme shortestI'il1ljOl'O!lnrket-cyclelrOn-record—'-'– Very simply, the timing appears drastically wrong for a major top starting to build in late 1983-early 1984. Yet we have had, so far, a 66 advance. There are numerous major advances on record which have wound up falling short of this mark, and it is indeed necessary to go back to 1953-1956 to find a bull-market upswing (104) which exceeded it by any significant margin. We have, furthermore, moved to 126 of the previous high chalked up in April, 1981. While this falls short of the kind of advances recorded in the 1950's and 1960's, it is considerably better than the four most recent cycles. To the extent that further upside potential exists in the current bull market, therefore, it will be in the upper range of past historical experience. What then of our forecast For the time being, we prefer to let the timing argument carry the day and are willing to proceed on the assumption that what started in June does not constitute a top formation. There exists ample historical precedent for a lengthy pause during the course of an upswing; much along the lines of the six-month trading range we have seen to date. Seven of the last eight cycles have seen such pauses. They have been as short as five months, involving corrections of as little as 7, on the order of what we have seen to date, and they have, as well, inVOlved corrections as deep as 17. The aftermaths of such pauses have, likewise, been varied, but in all cases the Dow was able to equal the previous highs ,and in most cases it exceeded them comfortably. Our current working hypothesis, therefore, calls for the recent sideways trading range to end sometime in 1984, possibly with a bit more corrective action than has already taken place. We would expect, however, that 1984, once this corrective process is over, will see new highs. We would not, however, in the light of current evidence coupled with the extent of the advance so far, expect those highs to be significantly greater than the peaks already achieved. It is J moreover, in the case of any forecast, appropriate to reserve the .right… of revision, and we think it especially appropriate in this case. There has, without a doubt, been extensive market deterioration since June, and we have been pointing it out with great regularity in this letter. If this deterioration continues well into the new year, the likelihood of the upside phase of the current cycle being at an end would become much greater, even with the almost total lack of historical precedent for a major top at this early point in time. AWTrs ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow-Jones Industrials (1200 p.m.) 1251. 83 S & P Composite (1200 p.m.) 163.19 Cumulative Index (12/22/83) 1990.77 A VERY MERRY CHRISTMAS TO ALL No statement or expressIon of opinion or any other matter herC\n contained IS, or IS to be deemed to be directly or indirectly, an offer or the soliCitation of an offer to buyor sell any security referred to or mentioned The matter IS presented merely lor the convenience of the subscnber While we bellel/e lhe sources of our information to be reliable, weln noway represent or guarantee the accuracy thereof norot the statements made herem Any action 10 be taken by the subscnbershould be based on his own investigation and Information Oelafletd, Harvey, Tabell Inc, as a corporatIOn and lIs ollicers or employees, may now have, or may later take, poslIIons or trades In respect to any secuntles mentioned In thiS or any tuture Issue, and such posItion may be dillerenl from any ViewS nowor hereafter expressed In thiS Of any other Issue Delafield, HaNey, rabel! Inc, which Is regIstered With the SEC as an mveslmentadvlsor, may give advice toilS Investment adVISOry and other customers mdependently 01 any statemenls made In thiS or In any other Issue Further Information on any secuf!\y mentioned herein IS available on request 1-

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