Tabell’s Market Letter – July 13, 1984

— 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 July 13, 1984 With the market declining during most of this week, the phrase a test of lows began to be hel,lrd with-1l1ol!OtQnol!.s. lows-to- test ,- and, for trheigsl!f!o!'tbi!eYt''i1eTChaeS'eu-s;-ethoefret-hiiiis\iSct1!hchaev,eEoifXicsofuerdsea, siimdpelwiaesystTheraredianrge previous -rafig- ,- '!his, indeed, has been the fact. For 33 trading days, since May 29, the Dow has held between a closing high of 1134.28 (July 3) and 1086.90 (June 15). Previously, it had held for 61 days, from February 22 through May 18, in an area bounded by 1186.56 and 1130.55. Trading ranges, in other words, have characterized most of 1984 so far. We attempted, this week, to examine the historical implications of such ranges. For such an examination it is necessary, first, to formulate a precise definition of a trading range. Our defini- tion was that such a range existed at any time when the high and low of the Dow for the prior 30 days had been within approximately 5 (log difference .05) of each other. A scan of stock-market history from 1926 to date revealed that there had been 262 such periods. The most recent two, of course, occurred this year, the earlier one lasting for 44 days. This was by no means a record. The Dow held in a 16-point range between 142.96 and 159.01 for 176 days between July 17, 1944 and February 19, 1945. More recently, it held in such a range for 102 days between February and August, 1972. The first point that became apparent from the scan was that such ranges seemed to be characteristic of bull-market, rather than bear-market, periods. For example, there have been 125 occurrences since 1958. Only 30 occurred during periods historically defined as bear markets. Expressing this same phenomenon with more rigor, one can state that only 85 of the 262 occurrences occurred when the Dow, at its average price for the trading range, was down from its level of 100 days previous. Of those, only 30 occurred when it was down more than 5. Of those 30 periods, only 15 lasted 10 days or longer. Those 15 occurrences are listed below. Start Date ———– Jul 17 1940 Aus 1 1940 Mar 22 1941 Ha, .1.3 1941 Mar .O 1948 Sep . ;,2 1969 Ap r ,,2.6 1973 Ap r 2,9 1977 Ma, 31 1977 Sep 22 1977 Dec 16 1977 Mar 23 1978 Dec .14 1978 Dec ,21 1979 Mar i,1 1984 Tradins D. J. I A. End Date Da'5 HHlh Low Averaser;'t, ———– ——- ——- ——- Jul 29 1940 11 123.15 121. 64 122.31 Aus 29 1940 25 127.26 121.28 125.01 Apr 16 1941 21 124.65 118.59 121.92 Jun 9 1941 23 120.16 115.73 116.96 Mar 24 1948 13 173.66 165.39 169.16 Oct 20 1969 35 839.23 802.20 823.21 Ma, 11 1973 12 956.58 921.21 938.18 Ma, 26 1977 20 943.44 903.24 929.09 Aus 5 1977 47 929.70 886.00 909.81 Oct 10 1977 13 851.96 834.72 840.90 Jan 5 1978 13 831.17 804.92 819.41 Apr 13 1978 15 775.21 751.04 762.38 Jan 4 1979 14 826.14 787.51 805.90 Jan 11 1980 14 858.96 820.31 839.93 Ma, 18 1984 44 1186.56 1130.55 1158.65 100 Das DJIA ——- 130.03 130.57 125.96 124.42 183.06 765.05 955.90 814.80 830.39 742.72 840.61 895.79 822.16 858.70 11 Later 7- Chs u … 6.31 4.44 3.32 6.38 8.22 -7.07 1.89 -12.30 -8.73 -11 .68 2.59 17.50 2.02 2.24 11' The table above also includes, for the 14 previous occurrences, the level of the Dow 100 days after the end of the trading range. It will be noted that the Dow was higher in 10 of 14 instances. Interestingly, three of the cases where the Dow declined following the trading range occurred during the 1976-1978 bear market. a rather unique historical phenomenon, best remembered for its selectivity. That market, in many ways was similar to the present one, except that. at that time, quality stockS leclined with secondary stocks holding up, while the precise reverse has been true over the past year. .' . The table would seem to suggest the likelihood that the Dow will be above 1158.65 (lb\3 hun- dred trading days after May 18, in other words on August 26. Were the worst case in the table (April-May, 1977) to be duplicated, it might be down 12.3 from that level, which translates to 1016. AWT rs ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL INC. Dow-Jones Industrials (1200 p.m.) 1107.55 S & P Composite (1200 p.m.) 150.77 Cumulative Index (7/12/84) 1838.05 No statement or eKpresslon of opInion or any other matter herem contained IS, or IS 10 be deemed 10 be, directly or indirectly, an oller or the solicitation of an offer to buy or sell any security referred to Of mentioned The matter IS presented merolyfof the convenience of the subscnber While we believe the sources 0/ ourm/ormatlon to be reliable. we in no way represent orguaranlee Ihe accuracy lhereof nor of the slatemenls made herem Any action to be laken by the subscriber should be based on hiS own Investigation and information Dela/lela, Harvey, labell Inc, as a corporal Ion and ItS officers or employees may now have, or may later lake, positions or trades 10 respect to any secuntles mentioned In this or any future Issue, and such posilion may be dllferenl from anY'lews now or hereafter expressed In thiS or any other Issue Delafield, Harvey, label! Inc, which IS registered Wl\t1 the SECas an Investment adVisor, may give advice to Its mvestmenl adVisory and other customers mdependently of any statements made In thiS or In any other Issue Further Information on any security menfloned herein IS available on request