Tabell’s Market Letter – January 04, 1985

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 January 4, 1985 For some years now, we have studied the familiar seasonal tendency of the stock market . tptage a.,-year..end rn.yL7and-'-it … hRs..,.been-t he..Cllstom of t-his-let-te-rtopoint-outsomeMhe—con—–I– Ourelusions-that can be derived from a study of this phenomenon. original study, going back to when the Dow-Jones Industrial Average first was computed in 1897. indicated that such a rally, however miniscule, invariably had taken place. However, two recent periods, 1976-77 and 1977-78, provided exceptions, with the DJIA, in each case, reaching its year-end rally high prior to the first day of January. At this pomt, 1984-5 could be another, since the high of 1211. 57, reached on December 18 and equalled on December 31 has not been bettered. The following facts about the year-end rally may be noted. 1. The year-end rally often has been of great magnitude, occasionally contmuing through the entire subsequent year without a 5 correction being recorded. It frequently contInued with only minor interruptions for as long as six months into the new year. In 1961, 1963, 1964, 1967, 1971, 1975, and 1976, the rally continued into February, March or beyond. However, on other occasions, it has been of only a few day's duration reaching a top extremely early as was the case in 1983-4 when the rally peaked on January 6 which turned out to be the high for the year. In 1960, 1970, 1973, 1974, 1981, and 1982, the rally reached a peak by the first week in January, and, as noted above, the 1976 and 1977 year-end rallies failed entirely to carry into January. 2. There has been a persistent tendency for the rally to begin early in years when the market has been up, and late in years when the market has been down. In recent upward years, 1967, 1975, 1979, and 1980 are examples, the rally commenced from early December. In recent downward years, 1962, 1966, 1969, 1977, and 1981, the rally began late in the year. 1984, a flat year, saw an early start on December 7. -I3. The important thing to watch in connection Ylith the market action in the early.-IDonthsl –ortne new year f.Tn atorementioneo hgtire, the Dec-ember low .. This low has been broken in 51 years out of the past 84. However, in 30 of these 51 cases, it was broken in January and February. For example, in 1970, 1973, 1977, 1978, 1981, and 1982, the December low wabroken in early January. Since 1937, it has never been broken later than mid-March with three exceptions, 1965, 1974, and 1981, when it was finally penetrated in August. In 1984, it was broken on January 25. Thus, if the market is able to hold above its December low for the first 2t months of the year, chances become good that this low will not be penetrated. 4. In years when the December low has been broken, the subsequent trend has been downwards two-thirds of the time. 1962, 1966, 1969, 1973, 1974, 1977, and to some degree, 1984, are typical cases. 1965, 1978, 1980, and most recently 1982 were exceptions. 5. The magnItude of the rally is an important clue as to the year's market trend. For example, an advance of 10 or more from the December low has been followed by an upward or neutral market in 36 of the 42 years that such an advance has occurred. An advance of less than 10 or more from the December low before an identifiable correction takes place has been followed by a downward market in 30 of the 42 years. In 1963, 1964, 1971, and 1980, the year-end rally approximated 10, and in 1972, it was 17. In 1962, 1970, 1973, and 1977, for example, it was less than this figure. 6. The length of time in which the rally continues into the new year is important. For example, in 24 years, the rally continued into March or later. In 20 of these 24 years, the eventual trend was upward. In 1964, 1972, 1975, and 1976, the year-end rally continued into March and in – , – ,1961, 1967, 1971, and I1J80, into February. This year, therefore, the December low, reached December 7 at 1163.21, will become an important reference point to watch. If the Dow is able to surpass its December 31 peak and advance from this low by 10, roughly to the 1280 level, or continue a rally into February or March, the long-term historical implications would be bullish. AWT rs Dow-Jones Industrials (12 00 p. m.) S & P Composite (12 00 p.m.) CumulatIve Index (/3/85) 1183.86 164.15 2lO3.61 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. No statement or epresslon 01 Opinion or any other mailer herein contained IS, or IS to be deemed to be, directly or Indlrectfy, an oller or the soliCitation of an offer to buyor sell any security referred toormenttoned The matter IS presented merely forthe convenience of Ihesubscnber While \\Ie believe the sources 01 our information 10 be reliable \\Ie In no wa.y represent or guarantee the accuracy Ihmoo\ n)! 01 \hes\atemn\s made hemin A.ny action to be taken by the subscnber Should De based on his o\\ln investigation and Information Delafield, Harvey, Tabell Inc, as a corporation ano ItS officers or employees, may now have, or may latel take poSItions or trades In lespectto any securities mentioned m thIS or anv future Issue, and such posItion may be olHerent from any views nowor hereafter eKpressed In thiS or any othellssue Delafield, Harvey TabeJl Inc, which IS registered With the SEC as an Investment Clovlsor may gIVe advlcetol!s Investment advisory and other customers mdependenlty of any statements made In thiS or In any other ISSue Further Information on any security mentioned heretn Is avaltable on request