Tabell’s Market Letter – October 12, 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) 924-9660 October 12, 1984 The recent short-term posltion of the general market remruns unchanged. From the fIrst of this f—mOiittheDow-JO;j-cs.!nduslMj\IAVFrngehis-spcnt-nioIjast-rwO'WlleJarbelow-ttre-clearly defiTedlnIl,,,,;t-…..,…. September trnding level of 1240-1190. closing at a recent low of 1175.13 on Tuesday of this week. then. the Dow hrts spent the remainder of the week trying to reverse thIS short-term, oversold downtrend. Lnst Febru.lrY in thIS letter we examined the record of the past malor-market cycles as we interpreted them from June. 1949 to dat and, in additIOn, suggested that a new cycle dId. In fact. begIn on August 12. 1982. Over SIX months IlUvc passed SInce that time and It IS mterestmg to reexamine the position of this current cycle WhICh we feel began over two years ago. The chart below shows the recent cycle with the major component swings in the S & P 500 from August, 1982 to date. Usmg a 10 filter, the high and low pomts are drawn to a uniform horizontal scale. The other data on the chart attempts to place. in perspective. the present cycle compared to the previous eight cycles mdentified. The horizontnl hnes drawn through the upper part of the chart show the length in trading days in each of these previous eIght cycles. UCLE. PlR) 00 ILOW-HIGH RDVRNCE) PERK CrCLE DATE 1–.g-); —-,—;–;;–,—c,.J1.96. 751 , JAN 1,,-,95,3 ('119.021 AUG 1956 1984 87 (-I 571 JUL 1984 147 82 OCl 1966 JUN A comparison of the length of these lines to the current cycle obVlously shows that each cycle has lasted a considerably longer period of time. The number of tradmg days 111 the current cycle is now 550 days old. This represents approximately 50 of the average length of the eight previous cycles (1053 days), and would indIcate approximately two years remaming In the present cycle. Cycles are measured fron low point to low pomt and a key questIon continues to be whether the high of October 10, 1983 constituted the peak for the current cycle. The relative times of the preVlous cycle peaks, again drawn to scale on the chart, are indicated by date and shows by the vertIcal tick marks on each of the cycle lengths. Again, It becomes apparent from the evidence presented in terms of relative length of time from cycle low to cycle peak that a possible further high could stIll be achieved. However, also shown on each cycle length is the percentage increase from cycle low to cycle peak. The recent percentage Increase of the S & P 500 from a cycle low to cycle peak is 68.57. ThIS increase 81though low in terms of the average advance of approximately 80 for the prevIOUS eight cycles has, in fact, already exceeded two previous periods, 1966-70 and 1978-82. It is interesting to note that the ilrst four cycles listed above reached their peak toward the end of their respective cycles while the last four cycles reached their peak toward the mIddle of their cycle length. What was dIfferent between the first four cycles and the last four cycles The fIrst four cycles occurred in a market enVIronment that was m a clearly defined cychcal long-term uptrend with an average annual inflation rate of under 2. The second group of four-year cycles occurred in an enVIronment which reflected a flat cyclical trend with an average annual inflation rate in excess of 7. It now becomes necessary for the market to accommodate the cycle theorist by postmg a new hIgh in the market. If this occurs, how the investor perceives the 10T'.g-term future of the market mIght give a c1ue to whether the cyc1e peaks 111 the middle of Its cycle, Le., flat cyclical trend, hIgh inflation rate. or toward the end of Its cycle. l.e . secular uptrend. low inflatIOn. Dow-Jones Industrials (1200 p.m.) 1195.23 S & P Composito (1200 p.m. 163.60 Cumulative Index (10/11/84) 2023.22 ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL INC. No Slatment or O)fPISSlon 01 OPlhlOn or any other matter herem contained IS Of IS to be deemed to be dlrecHvor mdlrecHv, an oHer or the soliCitation 01 an alter to buy or sell any security referred to or mentioned lhe mailer IS presented merety forlhe conenl!nce 01 the subscnbr White we believe the sources 01 our mtormallon lObo roliable, we In no way represent or guarantee the accurac; thereof nor 01 Ihe statements made herein Any acllon 10 be taf-en bv the subscriber should be based on hiS own invesltgallon and information Delatleld Harvev, labelt fnc, as a corporallOn and Its oillce's 01 employees may now have or may laler lake POSlllonS Of trades In resi)e;t 10 any secUrities mentlOnea In thiS 01 any futule Issue, and such posillon maybe Oillerent Irom any views nowor hcreailer e(pressed In thiS 01 any olher ISSUO Delatleld, Harvey labelt Inc, which IS regIStered With the SEC as an Investment adVisor may give advice to ItS mvcstment adVIsory and other customers Independently 01 any statemonts made In this or In any other Issue Further mtormalion on any secuflly menlloned herein fs available on request