Viewing Month: September 1985

Tabell’s Market Letter – September 06, 1985

Tabell’s Market Letter – September 06, 1985

Tabell's Market Letter - September 06, 1985
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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- . September 6, 1985 – – w-e- — .SeH-cannib8J.ismfS -art-exerCIse -occasIOnally practlcedr-by mosCmarket-J.etter wnters and –in- tend .to indulge in it ourselves this week. ThIS letter will be a review of two recently-publIshed issues of thIS letter. Re aders may conSIder themselves warned In case they wish to crumple the piece at this stage and aim it at the nearest waste basket. Those still wIth us will recall we produced last week a rather lengthy disquisition on the tend- ency of the stock market to declIne during the month of September. It IS. 85 we pointed out, certainly not a umform tendency but a September decline has. indeed, occurred in 36 of the past 59 years. We noted last week that there 1S no way of saying with certainty that this 59-year record is not a random phenomenon. Statistical testing (which we apphed in this case) told us only the probability of such a record's occurrIng purely by chance. That probability is approXImately one in one hundred. This suggests, in other words, the strong likelIhood of a correlation between a given month's being the ninth on the Gregorian calendar and that month's seemg a declining stock market. ThIS constitutes correlation. and It can be used as an illustration of a baSIC statistical principal — one that is not Irrelevant to the practIce of technical market analysIs. That prinicpal is that cor- relation does not imply causatlOn. It was brought to our attentlOn many years ago by the gentleman who fIrst taught us elementary statistics and who, an academic hImself, was fond of CIting an ob- served high degree of correlation between college professors1 salaries and U. S. beer consumption. He could, actually, have picked a somewhat better example. It is. admittedly, highly unlikely that the simple raising of professorIal stipends could. in itself, dIrectly influence the consumption of malt bever- ages. Nonetheless. it is certainly reasonable to suspect that the two series are mutually correlated with some other economic time series. gross national product. perhaps. or, more hkely disposable personal Income. Thus, the example is not really as implaUSIble as it seems on the surface. Nor is the appar- ently evident correlation between the month of September and declImng stock markets. Now It is quite true that a causal relationship between the calendar and the stock market is dif- ficult to believe. Nonetheless, it is at least conceivable that there exists some other phenomena likely I —-..to occur during the month of September WhICh encourages sellers of stock, although, to be honest, we . nllve-notnirrSrS to what it might -.Portfolio-wtm1ow-dremrrg''—-o1ocurs—;n-September-bu-t-,—I also takes place in the other three quarters. The September quarter, due to vacations, tends to be a seasonally low one for corporate profIts. but this known fact. one would think, should already be built into market expectations. Even so. It is credible that there exists. somewhere out there among the forces that relate behavior to the seasons. something which could make September a more likely month for a stock-market decline than other months of the year. It is thus. probably, a wise decision, to take the September seasonal record into account. to some degree, in planning portfolIo strategy. What we are saying. of course. IS that a key element In such a decision must be plausibility — which brings us to the subJect of another recent market letter. the one we wrote three weeks ago on the tendency of the success of the New York Mets to produce stock-market weakness. We cannot resist in this instance commenting on a certain irony. This letter has been published for almost 40 years. and the bulk of its content has constituted an attempt at serious stock-market an- alysis. It is probabl.e. however. that no letter in our 40 years of publication has produced as much comment as this one WhICh was cl0n-a. frankly, in fun. One newspaper, indeed, chose to carry a syn- OpSIS, not only on the front page, but in an eIght-column banner across the top of the front page, a treatment which the strud New York Timu's last used for the first moon landmg. We are certainly not unhappy about the wide notice taken of our feeble attempts at drollery, although we suppose a moral exists here also. The letter was essentially an attempt to use whatever skills we have developed in 30 years of writing, to make a correlation between two wicfely disparate phenomena sound plausIble. There do, unfortunately, exist occasional attempts. done seriously rather than humorously, to use the same sorts of skills to assert correlatlOns between other phenomena. What these attempts uniformly lack. of course, are serious and unbiased tests of real signIficance. No such tests were applied. of course. in the Mets letter but. even had we taken the trouble to nvent' a complex formula to force a correlation — something not impossible with sophistIcated number- crunching — it would have been meamngless. We are back again to the test of plausIbility, a test we have previously applied and found wanting in the case of the unusual purely-statislical record posses- sed by the infamous Super-Bowl Indicator. — – — – – – – What we are sa)ring .of course, is that based on such tests. there exists valid reason for paYlng attention to the month of September as a market factor and very little non-recreational reason for por- ing over New-York-Mets box scores. That distinctIon is quite clear in this case — less clear, perhaps, than it IS in published discussions of other market indicators. AWTrs ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL INC. Dow-Jones Industrials (12 00 p. m.) S & P Composite (12 00 p.m.) Cumulative Index (9/5/85) 1331. 09 187.76 2583.18 No statement Of epresSlon 01 opmlOfl Of any other ma1ter herem COfltalned IS, or IS to be deemed to be, directly or lfI(lIrectly, an oHer or the solicitation of an offer 10 buyor sen any security referred 10 or menlloned The matter IS presented merely lor the convenience of the subScriber While we believe the sourcesol our Informa\!on to be reliable, we In no way represent or guarantee the accuracy thereof norol Ihe statements made herein Any action to be taen by the subSCriber should be baseO on hiS own Investigation and lnformalton Delalleld, Harvey, Tabetl Inc, as a corporation and I\S officers or employees, may now have, or may laler lak.e, pOslllons or trades in respect to any securities mentioned In thIS or any future issue and such pOSition may be dlflerenl from any views now or heleafter expressed In thiS or any other Issue Delafield, Harvey Tabell Inc whiCh Is rC9lstered With the SEC as an Investment adVisor, may give adVice to Its Investment adVISOry and other customers Independently 01 any statements made In Ihls or In any other Issue FUrther Information on any security mentioned herein IS aVailable on request

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Tabell’s Market Letter – September 13, 1985

Tabell’s Market Letter – September 13, 1985

Tabell's Market Letter - September 13, 1985
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v Li\IEHELL' S (;Uj)Li\Ii lEV LIEVVIER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 9249660 September 13, 1985 Portfolio management, and. perforce, technical analysis, which is its servant, divides naturally into two general disciplines. The first such discline Involves assessment QJthe over.all market.environment. 'demonstrated- stocks possess a– – – Thiff'1fssumes importance b-eC!ause;itfias n-repeafedly ihat-cl'– high 0 '- degree of covariance. Indeed. studies have shown that as much as 70 of the variation in stock prices can be attributed to movements in the general market. It therefore becomes folly to construct a portfolio with heavy equity exposure, however attractive those equities may be on an individual basis. if one feels strongly that the market in general is highly vulnerable. Once a decision on asset mix has been made, however. the second discipline, that of analysis of individual stocks, comes into play. To the extent that common stocks are included in that asset mix — and they almost always will be — an attempt obviously should be made to select those individual stocks likely to outperform the general market. The trouble with the above neat categorization, though, is that the two disciplines tend to inter- twine and fold back upon each other. From the technIcian's point of view, regardless of the number of macro-market indicators he may follow, his analysis of individual stocks will feed back into his analysis of the market enVlronment. When large numbers of stocks appear technically attractive on an individual basis, the analyst's market opinion will presumably be more bullish then when the opposite is the case. The same dilemma confronts the portfolio manager. Stocks present differing degrees of volatility, ex- pressed by the concept, borrowed from statistics. of beta, and a pessimistic market opinion presumably can create a bias in favor of less volatile stocks. Life is not easy, and. at the present time. the interaction of general market analysis and individual- stock analysis IS producing an unusual number of conflicting SIgnals and unresolved dilemmas. To begin with. our own analysis of general-market indicators. does not allow us to become excessively bearish at this juncture. Three weeks ago we noted that the market had moved to a new high coupled with a breadth confirmation as recently as July 19. The normal lead time of breadth on market highs, we tried to suggest, indicates that an imminent decline, before an attempt on new highs. is an historically unlike- lyoccurrence. On the other hand.we have the question of the current cycle's evident maturity. Read- ers are aware of our oft-argued opinion that the four-year cycle phenomenon is a real one and are equal- 1 I –'J)l-ARwaoLthefaotthatconveJltional-anely-sis-of-t-he.t–ey-cle-makes'it–now…thrce-years–plus-'-one …month-old–I This is decidedly long in the tooth and suggests that a decline commencing at a point not too far removed from the present and ending sometime in 1986 is a real possibility. Now let us superimpose our analysis of individual stock patterns on this picture. To some degree. such analysis must confirm the caution engendered by an examination of the four-year cycle ,if one comp- ares the sorts of patterns that exist today with those of, say, the summer of 1982. Three years ago, we saw hosts of stocks starting moves off bases that went back many years, bases which were the end pro- duct of long years of still earlier decline. Today we see, In many cases, the upside objectives of those bases having been reached. and we see precious few instances of stocks which have declined sharply, formed new major bases and now seem to be on the verge of maJor upside moves. Yet, individual-stock work does not lend itself to an excessively bearish bias either. We have been pointing out, indeed. we hope, while the game was underway, that last summer's trading essentially con- sisted of a shift in leadership. Disinflation-hedge issues, which had been upside leaders for a year. suddenly relinquished that position, formed small tops and began to move lower. Meanwhile, a num'ber of cyclical issues found new short-term relative strength and moved precisely in the opposite direction. It is. in general, possible to place these two contrary movements in a general context. The down- ward move in disinflation-hedge stocks was preceded only by short-term distribution, and the objectives of that distribution are close to being reached, meaning that much of the technical damage is largely re- paired. Cyclical issues. on the other hand, are among the minority that possess the sort of attractive long-range base formations we discussed above. The upswings, by and large, were moves from the bot- tom to the top of these long-term tradmg areas. There is, thus, both a bullish and bearish scenario for the two classes of stocks. The bullish one would call for the former leaders, having completed necessary corrections, to resume long-term upward trends and for the cyclicals to continue their recent moves by breaking out of their long-range bases. A bearish scenario would call for broadening tops in consumer- related stocks and the return to the bottom of their trading ranges and resumption of their slumber by cyclical issues. None of this, however, would produce a great deal of fireworks on the downside. – The purpose of this exercise. quite obviously. has been to pose questions rather than give answers, and we think it part of wisdom to recogruze that the stock market occasionally presents us with environ- ments when the former exercise is the appropriate one. Our own view, repeatedly stated. is that sub- stantial downside risk, while conceivably lurking somewhere out there in the nebulous future, is not cur- rently staring us in the face. The twin disciplines of market analysis and stock selection may. in the future, call for drastic action. the former toward reduction of equity exposure. the latter toward massive portfolio-shifting away from disinflation-hedge issues. We do not feel. however. that it is necessary to embark aggressively on either course at the present time. Dow-Jones Industrials (12 00 p. m.) S & P Composite (1200 p.m.) Cumulative Index (9/12/85) 1304.88 183.36 2429.81 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. NO stalement or cpressloll of OpllllOIl or any other matter herern contained IS, or IS 10 be deemed to be, dlreclly or indirectly an oHeror the solrcltatlon of an offer to buy or sell any security referred to or mentioned The matter IS presented merely for the convenience of the subSCriber While webelreve\he sources of our information to be reliable, we m no way represent or guarantee the accuracy lhercot nor of the statements rnClde herein Any action to be taken by the subscrrber should be based on hiS own Investigation and mformatlon Delafield, Harvey, Tabell Inc, as a corporation and ItS officers or employees, may now have, or may laler take, pOSIltonS or Irades in respect to any securities mentioned in this or any future Issue, and SUCh position may be different from any views now or heleafter e1pressed In Ihls or any other Issue Delat reid Harvey Tabelt Inc. which IS regIstered With the SEC as an Investment advisor, may give adVice to ItS Investment advISOry and other customers Independently of any statements made In thIs or In any other Issue Further Information on any secunty mentconed herem IS available on request

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Tabell’s Market Letter – September 20, 1985

Tabell’s Market Letter – September 20, 1985

Tabell's Market Letter - September 20, 1985
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V Lii.\BHE8.8.'S Iil1lI 1Rl &;;EV D.EVVCEOO 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE. INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC (609) 9249660 September 20, 1985 By no measure has the stock market, since mid-July, acted well, but there has been, within 1- thattme-, significan!.. dispariy..2etwe'l the action..9f thew…m2t \Vy foll\V(L ll!.arket. …nct ice,, ,Ir,–I the Dow-Jones IndustrIals and tile S '& P 500-' -. ' – ' – – . — -. — ' .. – – u. –'-.- – .- At Tuesday's close, the Dow found itself down a relatively minor 4.5, an amount which has been topped on no fewer than six occasions since the bull market began in August, 1982. The S & P, by contrast, was down 7.3 for the worst percentage decline since the long intermediateterm drop of November, 1983-June, 1984. The reason for this disparity can be readily ascertained by looking at the components and computation methods of the two averages. The Dow contains two stocks (Union Carbide and Gen- eral Foods), that are up almost 10 from their close on the day the Dow made its high. Since the DJIA is effectively price weighted, these stocks rank second and tenth in terms of weight within the average itself. The top 50 stocks in the capital-weighted S & P account for 40 of the weight of that aVer- age. The best performing stock in that group (DigItal Equipment) was, at mid-week, up only 5 from the S & P's peak date. Almost half of the largest 50 components were down 7 or more, with 11 double-digit percentage declines. – .. I l' I I, 1115 This has produced differing technical patterns for the two averages, which are shown above in their point-and-figure configurations, the five-point-unit chart of the Dow on the left and the one-point chart of the S & P on the right. The Dow pattern shows a protracted trading range between 1325 and 1290 which occurred durmg June. It has currently managed to hold above this level, while the S & P has broken below its comparaNe range between 191 and 186. The latter, however, at recent lows, has moved into a strong support area between 184 and 177, represented by trading during February and March. The corresponding level for the Dow is between 1300 and 1245, and it could well push further into that area. As the charts show, conservative downside targets are 1275 for the DJIA and 179 for the 500. The former would, in the case of the Dow, involve breaking the June low, but we would not regard this as serious since it would only bring it into line with most other indices. The deeper downside targets, 1220 and 174, respectively, breaking the March lows, appear to us as less realistic immediate possibilitIes. We would, rather, expect the February-March support levels to hold for the time being. The danger, of course, would be further protracted back. ing and filling in both averages at or just below -current levels. Such action could produce rather dangerous head-and-shoulders configurations. However, such patterns would fake time to develop. AWTrs ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow-Jones Industrials (12 00 p. m.) S & P Composite (12 00 p. m.) Cumulative Index (9/19/85 1308.24 183.99 2403.25 .. No statement 01 eprcss!on 01 opinion or any other maHer herein contamed IS, or IS to be deemed \0 be dlreclly or Indirectly, an oller arthe soliCitation of an offer to buY or sell any security referred 10 or mentioned The matter IS presented merely for the convenience of the subscnber While we believe the sources of our information to be reliable, we In no way represent or guarantee the accuracy thereof nor ollhe statements made herein Any action to be laken by the subscriber should be based on hiS own investigation and information Delafield, Harvey Tabell Inc, as a corporation and ItS officers or employees, may now have, or may later take, posl110ns or trades In respect to any secUrities mentioned In this or any future Issue, and such pOSition may be dillment from any views now or hereafter eypressed 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 Independently of any statements made In thiS or In any other ISSue Further InformallOnon any security mentioned herein Is available on reQuest

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Tabell’s Market Letter – September 27, 1985

Tabell’s Market Letter – September 27, 1985

Tabell's Market Letter - September 27, 1985
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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 September 27, 1985 It is occasionally necessary. In the course of market analysis, to adjust some f81rly standard ,;-compu!tion , A long;!iJ!1' ieJ.l-BJ1dcolleagueof….ours..took';.u&o..totask- for- this-408 few .,-y-ears-ago, when – – the oils were leading .. the-;-marketon -tlle'upside and we attempted'to prove internal weakness by recon- structing the S & P 500 with oil issues excluded, Our friend sent us a graph of a straight line and in- formed us that this was the S & P 500 with everything excluded. Nonetheless, we maintain that such adjustments can. in some cases. be useful. The necesslty arose pin this week as General Foods became the object of takeover rumors and managed to tack on 27 t poins in the first four days of last week. It Just so happens that GF is one of only 30 stocks in the Dow and, due to its high price, one of the most-heavily weighted components in that index. We therefore felt compelled to go back to the July 19 high and reconstruct a 29-stock Dow excluding it — an easy process following Dow-Jones own computation methods. This process shows the DJIA, which actually closed at 1312. 05 on Wednesday some 14 points above its Friday low, to have posted a new Wednesday bottom at 1284.99, almost eight points below its most recent bottom of last Friday. This should not, actually, be all that surprising. The S & P 500, which contains General Foods as a much smaller relative component, reached approxlmately 180 before rallying yesterday, versus the previous low, on September 17, of 181. 36. All of this does nothing more than underscore the fact that the market has not been behaving very well, something that could have been determined by forgetting market averages entirely and look- ing at the breadth figures for the past few weeks. As our readers know, we have computed a normal relationship between breadth and the Dow going back over some 35 years. Thus, there should exist, given the Dow change, a normal number of advancing and declining issues on any given day. For the 22 trading days from August 21 through yesterday, the number of advancing stocks has been below normal on 19 of them t and the number of declining issues has been greater than the normal figure more than half the time. We think this process of demonstrating fairly significant market weakness is a worthwhile I The persistence of such weakness, indeed, indicates that the corrective process -;Fbenisto its1r.illastk!firEM–lr— Thursday. The Dow, adjusted for also fairly target of 1275. With a corrective phase well underway, it becomes necessary to ask ourselves whether the pre- conditions for a bottom are in fact present. Within certain limits, it is our belief that they are. Those limits arise out of our continuing belief that the present process remains within the framework of an on- going bull market. Weakness, we are perfectly willing to admit, has been sufficient to provide what may be the first link in a chain of evidence suggesting irreparable damage to the bull market. We are going to operate, however, on the premise that the current drop does not constitute the initial stage of a major –cycle decline. Given that premise, a rally bottom could be expected to be accompanied by a moderately oversold rather than a deeply oversold condition. We are, we think, certainly approaching such a condition as of this week. We saw, for example, an expansion of new lows to figures in the 40-80 range on five recent tradIng days. This is the sort of level reached, for example I in late December last year, a point from which a fairly significant rally took place in January-February. It is a level at which a fair number of minor declines have managed to bottom in the past. The 10-day total of advances minus de- clines reached -3720 on September 17. ThIS is, on an historical basis, certainly not a low figure, but it is one which has managed to turn a fair number of short-term drops including quite a few recent ones. Thls sort of quasi-oversold condition may well turn out to be sufficient in the light of the way bottoms have lately tended to form. Full-scale selling cllmaxes have become almost historical CUriOSI- ties. The last demonstrable one occurred on Silver Thursday. back in 1980. Even major bottoms, August, 1982 being a prime example , have tended to mur after a protracted period of exhaustion. Such may well be the case in the current instance. If thIS is the case, we are probably, at the moment I closer to an effective low in terms of level rather than time. The seasonally-poor month of September is close to beIng over, but the aftermath of thepresent declining phase could well turn out to be a protracted period of sideways drift rather than any notable immediate rally. Such a sideways drift could well continue for another couple of months, until the normal year-end rally tendency manifests itself. Dow Jones Industrials (9/26/85) S & P Composite (9/26/85) Cumulative Index (9/26/85) 1320.79 181. 29 2385.18 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. AWTrs NO statcment or epresslon of Opinion or any other matter herem contaulOd IS or IS to be deemed to be directly or mdlrectly, an oller or the soliCitation of an offer to buy or sell any security reterred toor menhonod The matter IS presented merely forthe convenrence of the subscriber While we behevethe sources of oU/lnformallon to be reliable we In no way represent or guarantee tho accuracy ther(X)1 nor of the statemonts mado herem Any acllon to be taken bv the subscflber should be based on hiS own rnvesllgatlon and mformallon Delafield, Harvey, Taboll Inc, as a corporahOn and liS OfflcefS Of employees may now have, or may laler lake, poSItrons or trades In respect to any securities mentioned rn thiS or any future Issue, and such position may be dltlerent from anyvlcws now or hereafter opressed In thiS or any other Issue Delafield Harvey Tabell Inc which IS registered with the SEC as an Investment adVisor, may Qlvoadvlco to ItS Iflvps\menl adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further Information on any security mentioned herem Is available On request

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