Tabell’s Market Letter – January 10, 1986

Tabell’s Market Letter – January 10, 1986

Tabell's Market Letter - January 10, 1986
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 January 10. 1986 After posting a new high of 1565.71 in the Dow Jones Industrial Average earlier this week. – , the \!did.smeth!!lg..i. has not !,one in-over!-hree- years,…- -correct -its.!lLi, 87single- trading. session over 2-1/2. As spectacular as this 40 point correction was, it. of course, -is not ,unprecedented. In the post-war experience from January 1949 to date. there have been 31 similar corrections of at least the same magnitude. Taken by itself, this correction does not change our constructive view of the stock market. However. as the bull market continues to mature. these events should not be discounted. For some years now. we have studied the familiar seasonal tendency of the stock market to stage a year-end rally. and it has been the custom of this letter to point out some of the conclusions that can be derived from a study of this phenomenon. Our 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. 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. However. 1985-86 will not be an exception as the DJIA has already reached a new high on January 7th at 1565.71. The following facts about the year-end rally may be noted. 1. The year-end rally often has been of great magnitude. occasionally continuing 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 next year. In 1961. 1963. 1964. 1967. 1971. 1975. 1976 and. most recently. 1985. 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 1983-84 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 —Jrst-wekcinJanuary.——-;———-… — 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. 1985. an up year. saw an early start on December 2. 3. The important thing to watch in connection with the market action in the early months of the new year is the aforementioned figure. the December low. This low has been broken in 51 years out of the past 85. 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 was broken in early January. Since 1937. it has never been broken later than mid-March with three excep- tions. 1965. 1974. and 1981. when it was finally penetrated in August. In 1985. of course. the December low was never broken. Thus. if the market is able to hold above its December low for the first 2-1/2 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 down- wards 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 37 of the 43 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 ex- ample. in 25 years. the rally continued into March or later. In 21 of these 25 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 1980. into February. This year. therefore. the December low. reached December 2 at 1457.91. will become an important reference point to watch. If the Dow is able to advance from this low by 10. roughly to the 1600 level. or continue a rally into February or March. the long-term historical implications would continue to be bullish. RJSke Dow Jones Industrials (12 00 p. m.) 1519.03 S & P Composite (12 00 p. m.) 207.20 Cumulative Index (1/9/86) 2666.12 ROBERT J. SIMPKINS. JR. DELAFIELD. HARVEY. TABELL INC. No statement or eJl;preSSlon 01 opmloo or any other maIler herem contained IS, or IS to be deemed to be, directly or mdlrectly, an oHer or the soliCitation of an oHer to buyor sell any security referred toor mentioned The mailer IS presented merely lor the convemenceo! the subSCriber While we beheve the sources of our n!ormatlon to berehable, we In noway represent or guarantee the accuracy thereof nor 01 the statements made herein Any acllon to be taken by the subSCflber shOUld be based on hiS own Investigation and Information Delafield Harvey, Tabell Inc as a corporation and lIS ollicers or emptoyees, may now have, or may later take, pOSitions or trades m respect to any securities mentioned In thiS or any future Issue, and SUCh POSition may be dlHeren! from any views nONor hereafter eJl;pressed In Ihls or any other Issue Oelafleld, Harvey Tabel! Inc …. hlCh Is registered With the SEC as an Investment adVisor may gIVe adVice to Its Investment adViSory and other customers Independently 01 any statements made In thiS or In any other ISsue Furlher Information on any securll y mentioned herein IS available on request

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