Tabell’s Market Letter – March 23, 1984

Tabell’s Market Letter – March 23, 1984

Tabell's Market Letter - March 23, 1984
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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 March 23, 1984 rWe tried, in this space last week, to put together our thoughts on the market after return- ;. – -ing -from- prolractea-vacation. Tl1e bal;icconl!lusion-swe'reached-1'arr,b – summarized-as-followSi- . (1) Based on historical precedent, there was persuasive evidence for regarding the market weakness from November through February as part of a bull-market correction rather than a cycle bear mar- ket. (2) There existed, however, real cause to doubt that the corrective process was complete. (3) It was likely that, before the process came to an end, further base-building action would be required. Last week's action was consistent with that view. A week ago, the Dow had moved up 4.4 from its February low and a great many intermediate-term indicators were poised to produce buy signals on further strength. That strength totally failed to materialize, and the Dow retreated to a low, as this is written, of 1150.33 va. the February 22 low of 1134.21. We regard this as construct- ive. A significant move at this stage would have been premature and probably could not have gen- erated enough power to move through the overhead supply at year-end levels. We noted last week that, based on 1984 action so far, a new sort of process was Obviously under way. If one applies a 5 filter to the action of the Dow since August, 1982, one finds five declines prior to the present one. The largest was under 7 ,and the longest lasted 36 trading days. The present case has produced a 11. 89 decline so far and has lasted 58 trading days through the February low and 80 days to date. We suggested a week ago that such drops, rather than being without precedent, had been normal features of bull markets in the past. We attempt to document this fact in the following table, which shows the statistics for the largest correction in each of the nine bull markets since 1949 Largest Correction Change to Next High No. of Days Bull Mkt Breadth r'rom P,ev. From From Start Start Date Decline …. 6.f-1-3.J-49.f1-2-l50 -l-a.a5 Decline 2..-87 Days From Low 22 48-.-1-9 High Low 28 .64.r6-B3 High 7.05 9/14/53 8/26/56 -12.69 – 8.50 132 14.50 – 0.03 104 236 10/22/57 115/60 -17.42 – 9.28 205 29.83 7.16 284 489 6/26/62 5/14/65 -10.54 – 6.51 30 18.39 5.90 157 187 10/7/66 9125/67 -12.51 – 7.67 122 19.40 4.46 154 276 5/26/70 4/28/71 -16.07 -11.22 146 31.80 31.79 285 431 12/6/74 7115/75 -11.07 – 6.44 55 29.41 15.06 246 301 2/28/78 2/13/80 -16.01 – 6.93 46 34.90 13.29 256 302 8/12/82 11/29/83(1) -11.89(1) – 3.80(1) 59'80(2) (1) Todate (2) 58 days to 2/22; 80 days to 3/23 The first two columns of the table show the start date for each bull market followed. by the start date of that bull market's largest correction. All of them produced, somewhere along the line, corrections either approximately equal to, or in some cases significantly greater than, the present one. There were two instances of 16 declines and, in 1960, a 17.4 drop. Something on this order of magnitude would take the Dow to 1080. For purposes of comparison, the breadth-index decline (adjusted to issues traded) is shown for each correction. It can be noted the; drop in breadth is minor so far, and this could well tend to suggest more room on the downside. In terms of length, the current decline has been shorter, to date, than many of the pre- vious corrections. The 1960 correction was 205 days long, the 1967 drop lasted 122 days, and the 1971 decline consumed 146 days. Were we to move into this range, the ultimate low might not be reached until sometime during the summer. On the constructive side, however, it must be noted that, following the previous corrections, significant advances were invariably seen. The-1950 case is probably 'unusual but the other seven rallies range from 15 to 35 from their lows. Measured against the previous highs, they range from equaling the old high in 1956 to moving above it by fairly Significant amounts. As the final two columns show, most such rallies, again eliminating 1950, continued for six months to a year after their low and, in most cases, somewhat over a year beyond the previous high. This would extend the ultimate bull-market high into sanetime in early 1985 and would be consistent with both normal cycle theory and the election-year pattern. Thus the view of the present as a correction typical of a mature bull market is, we think, a not implausible scenario. AWTrs Dow-Jones Industrials (12 00 p. m.) 1150.33 S & P Composite (1200 p.m.) 156.72 Cumulative Index (3/22/84) 1969.18 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. No statement 0' e)(press!on 01 opInion or any other malter herein contained IS, or IS to be deemed 10 be, directly or mdlrec1ty, an offer or the sollCllaUon 01 an ofler to buy or sell any secunty referred to or mentioned The matter IS presented merely lor tho convenience of the subSCriber While we bcllcve the sources of our information to be reliable, we In no way represent or guarantee the accuracy theroof nor of the statements made heroin Any action to be taken by the subscnber should be based on his own investigation and information Delafield, Harvey, label! Inc, as a corporation and Its officers or employees, may now haye, or may later take, posItions or trades In respect to any secuntles mentioned In thiS 01 any future Issue and such position may be different from any views nowor hereafter CJlpressed In thiS or any ether Issue Delafield, Harvey label! Inc, which IS registered With the SEC as an Investment advisor, may give advice \0 Its Investment adVISOry and ether customers Independently 01 any statements made In thiS or In any other Issue Further Information on any security menloned herein IS available on request

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