Tabell’s Market Letter – December 21, 1984

Tabell’s Market Letter – December 21, 1984

Tabell's Market Letter - December 21, 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 December 21, 1984 -. It is theCnormal-cllstom of thIS -letter to precede a yearcnd-forecast with-areviewof- the -year- ………-.-.. — Just past. Normally thIS is a fairly easy task, but reviewing 1984 within the confines of our normal space allotment constItutes somewhat of a challenge. On the face of it the stock market did absolutely nothIng last year, since the Dow WIll likely end the year at a level not far from its 1983 closing of 1258.64. Underlying this SImple statistic, however. are a myriad of complexities. The basic market pattern for the past 18 months can be traced out approxImately as follows. The dynamic phase of the rise from August, 1982 culminated in June. 1983. Following this, there occurred three minordo\.nthrusts and upsurges with highs in October, 1983, November 1983, and January, 1984. There followed a sharp, broad break which bottomed in February, 1984. which, in turn, led to a drift- ing, sideways-ta-lower pattern which brought about lows for the year in July. There then ensued the extraordinary rise In August of this year. which, generally, carried through to hIghs in November. The pattern SInce then has been weakness continuing untIl the market posted Its sharp rally early thIS week. WithIn the confines of the above general pattern. however. the action of the various averages has been incredibly diverse. The Dow, for example, made its high in November. 1983 at 1287.20, declined 15.6 to July, and rallied this November to a level 3.3 under Its peak of a year ago. The S & P 500 topped out a month earlIer, in October, 1983, declined a little bit less (14.4 to July), and Its high in November at 170.01 was closer to its year-earlier peak than the Dow. The Dow-Jones Transport Average shows yet a different pattern. It continued Its rally into 1984, peaking at 612.63 in .Tanuary. Its high in November of this year was only 536.20, but its subsequent action has demonstrated significant im- ,provement. Unlike eIther the DJIA or the S & P, It has moved above its November-24 high, although it remains almost 10 under its early-January peak. UtilIties, as we have had occasion to note in thIS space, show a different pattern still. Their 1983 high took place at the end of October. However. the DJUA was able effectively to hold its Febrmry I low in July, and, on the rally to November of this year, moved 3.6 above its 1983 peak. That strength 4h6SCGnt-inuedndt-hejlll.t-y.;Aver-FlgerJusthlS-W.e;ek-posted–o.buIEm.aJ;ket bjgpt 149 .93… —- Finally. while all this was going on. action in the Over-TheCounter market constituted a blood -r bath. The NASDAQ Industrial Index peaked earlier than all other major averages, in June, 1983. It rallied very lIttle in late 1983-early 1984 and, by July of this year, had plunged from 408.4 to 250.1, a drop of 38.8. It has furthermore demonstrated no ability whatsoever to post any kind of a meaningful rally and just about equalled its July low as recently as a week ago. In this wild dlversity of action, it seems to us. three possible scenarios emerge. There are more or less convinclng arguments for and agrunst each one, and they can be brlefly summarized as follows. A bear market beg-an in late 1983-early 1984. Thls possesses surface plausibility. Slnce, with the exception ot the UtilitIes, all of the averages mentlOned above reached hIghs during that period which have not, to date. been exceeded. It is certainly a true statement as far as the OTC market, with its 38 decline, is concerned. However. a bull market lasting only 10-17 months would be the shortest on record since 1938. Furthermore. the creditable performance turned in by large segments of the market throughout the year hardly seems consistent with conventional bear-market condihons. A bear market began last month. This scenario gains its plausibility from the fact that post- election-day highs in both the Dow and the S & P were close enough to their previous peaks so that 1984 can be described as a double-top formation. It gains further credItability from the existence at this pOInt of a breadth divergence of sufficiently long duration to suggest a market past its effective high. If the bull market's bfe is extended to November of this year, Its 27-month durahon puts it on the short side but not unusually so. Obviously, this thesis cannot, so far, be either confirmed or negated by recent market action. The bull market remaIns in effect. The hme factor is the greatest argument in favor of this one. It would be not at all without historical, indeed recent histOrIcal, precedent for the upswmg to continue its life well mto 1985. The Utility Average and a number of other market sectors show action consistent wIth thIS scenario. A number of measurements of underlying market vitality suggest that the performance of theyerl!geJ.Jhroughout . Counter -rtrguments -include- mO2f t…..!!c.2 J1alf-,,ol14 llnLdert!s .!..ma;. the breadth dive-rgence mentioned above, -plus the fact th atrai3-.m.!ornetnhg!lon-g' -.— failure of the averages to post new hlghs is highly inconsistent with traditlOnal bull-market achon. We will thus be faced next week with the task of issuing a 1985 forecast without really having in hand a clear identification of what the market was dOIng in 1984. We will, nonetheless, make an attempt to make some sense out of it and. in that light, examine 1985 prospects. AWTrs Dow-Jones Industrials (12 00 p. m.) 1197.66 S & P Composite (1200 p.m.) 166.15 Cumulative Index (12/20/84) 2079.91 ANTHONY IV. TABELL DELAFIELD, HARVEY, TABELL INC. A VERY MERRY CHRISTMAS TO ALL No statement or epresslon of opinion Of any olher mailer herein conlalned IS, or IS to be deemed to bo directly or Indirectly, an oller or the soliCitation 01 an oller to buy Of sell any secUrity relerred 10 or mentioned Thc matter IS prescnted merety lor the convenience of the subSCriber While we believe the sources 01 OUf Inlormatlon to be rellabte, we Inno way represent orguaranleethe accuracy thereof nor of the statemcnts made herein Any acllon to be taen bv the subscrlr.er shOuld be based on hiS own Inestlgatlon and information Delafletd, Harvey, TaDeli Inc, as a corpora lion and Its officers or employees, may now have or may later lake, POSitions or trades In respect to any secufilies mentioned In thiS or any future Issue, and such posJ/Jon may be different lrom any views now or hereaftcr e'pressed In thiS or any olher Issue Delafield, Harvey, Tabell Inc, which IS regIStered with the SEC as an Inveslment adVisor, may give adVice tolls Investment adVisory and other customers Independentty of any statemonts made In this or In any other Issue Further information on any secuflty mentioned herein IS available on request

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