Tabell’s Market Letter – May 18, 1984

Tabell’s Market Letter – May 18, 1984

Tabell's Market Letter - May 18, 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) 924,9660 1— – May 18, 1984 It has not been a particularly good two weeks for the stock market, with the Dow Jones Inoustriall,-havin'g refrliated's6file-45points s-;ncereaching'a ,I11gh'of-H8eI'5,6 .on- May,2 r;S,even''of-the- 11 trading days since that time have been down days, and included a 14-point whack on May 4, followed by a rather tepid two-day rally, a further 11 point drop on May 9, and, finally, an additional 10-point loss on Thursday of this week, Predictably, all this was concomitant with credit market weakness. long bond prices reaching new lows early this week from which they have, so far, demonstrated little desire to recover, Two weeks ago, before the market began its most recent slide, we took the opportunity, in this space. to point out the fact that the broad-based averages, at least, had broken out on the upside of their February-May trading ranges, although some of the other indicators, notably the Dow Industrial and Transport l)verllge., had failed to do so. We left ourselves with a small loophole in that letter by suggesting that strength in early May was at some variance with the scenario we had been envisioning most of the Spring, which, on a seasonal basis, suggested that the market might once more test its lows, very probably sometime around May-June. Something like such a test did seem to be emerging in this week's trading. Indeed, the Dow-Jones Transport average, a particularly weak feature of weakness on Thursday pulled back to a closing low of 480.35, exceeding its April 6 low of 484.16 by a fairly significant margin. Actually, all of this has not, to date, substantially altered the pattern which existed a couple of weeks ago. The broader indicators, notably the S & P 500 and the S & P Industrials have simply pulled back once more into the trading ranges from whence they emerged, and it still appears plausible that these trading ranges constitute base patterns which, evidently, will broaden still further. In saying this. we do not preclude the possibility of a new low below the 1130 level for the Dow. It is certainly conceivable that the kind of pessimism which such a downside thrust would engender is needed before the market can mount .,sort of meaningful turn. Indeed, a ,,!e pointed out a highs, an -,';'pide prospect hardly calculated to set hearts By the time the current process is complete, there might well exist bases suggesting something more meaningful. The real question we are raising, from a technical point of view, is whether or not a typical volume selling climax is necessary to turn the market. Volume, until just recently, had been one of the marginally positive elements in the picture ever since lows were posted at the end of February. Consistently, through the two months following that low, upside volume had exceeded downside vol- ume,and, as has been widely noted, many of the recent downthrusts were accompanied by some of the lowest volume levels of the year. This pattern has been altered slightly in the past four of five days, as a certain amount of downside volume has entered the picture. However, even at Thurs- day's close, short-term downside volume indicators had failed to approach anything like their peaks of February. Whether a selling climax is required remains an open question; given the change in character of today's markets. The most recent major bottom in August, 1982 occurred, of course, entirely without one. On the other hand, We have had two fairly recent intermediate-term bottoms, 1978 and 1980, both of which featured selling climaxes with almost textbook characteristics. We would not want to hazard a guess as to whether one is required here. Climax conditions, interestingly, may already have appeared in the bond market, which, of course, has been the focus of most recent headlines. It is difficult to track bond markets as pre- cisely as the stock market, since volume figures are not available and back history tends to be lack- ing. However, it is possible to trace the percentage changes in, for example, individual long-term treasury issues. Such an 'oscillator shows Treasury 8 3/4's of 2003-2008 down in excess of 5 over a 10-day period at their Monday levels. During the short history available, such a level has gener- ally denoted what, can be called a deep oversold condition. Interestingly; as'oi-Monday, this issue, at its bid price of 65' 29/32 was down 24 from its high on May 6, 1983 of 86 28/32. During exactly the same period. the S & P 500 had declined from 166.10 to 157.50 a drop of only 5.1. So much for the safety of bonds versus stocks, at least in the recent market environment. It can be said, indeed that the stock market has held up fairly well given the abysmal credit market conditions. If bonds are currently truly oversold, a turn in this area could well turn the equity market without conventional panic-selling conditions emerging. AWTrs ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC . Dow-Jones Industrials (1200 p.m.) 1136.31 S & P Composite (1200 p.m.) 156.30 Cumulative Index (5/17/84) 1921. 29 NO statement or expression of Opinion or any other matter herein contained IS, or 15 to be deemed to be. directly or indirectly, an oller Of the solicitation of an offer to buyor sell any secunty referred to or mentioned The matter IS presented merely lor the convenience of the 5ubscrlbor While we beheve the sources of our Itlformatlon to be renable, we In no way represent or guarantee the accuracy thereof nor 01 the statements made herein Any action to be taken by the Subscnber should be based on his own Investigation and Information Delafield, Harvey, labell Inc, as a corporation and lis olllcers or employees, may now have, or may later take POSitions or trades In respect to any securities mentioned In Ihls or any future Issue, and such pOSition may be dillerent from any views now or hereafter epressed In thIs or any other Issue DelafIeld, Harvey, Tabell Inc. whiCh IS registered with the SEC as an Investment advisor. may give adVice to lIs Investment adVISOry and other customers mdependently of any statements made In this or m any other Issue Further mformatlon on any security men\loned herein IS available on request

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