Tabell’s Market Letter – March 14, 1986

Tabell’s Market Letter – March 14, 1986

Tabell's Market Letter - March 14, 1986
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r- 4J;II' 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 March 14. 1986 There was yet another impressIve rally in the stock market thIS week as the Dow Jones Industrial Average closed at a record high of 1753.71 after posting a 43.10 point advance on Tuesday, the second biggest one-day gain on record, In very heavy trading. As impressive as thIS single day advance in low-.– …,.,….ptehreDenJtIA-ohis,diatyiasavnoatncuenpnaesd-beenetne'-de-,twteheedned,e-xfopurretseseend–i'n-ffrtfeferimasloiot-fep'selflrcceenthtaegeA. iiFiuosrt.Liegx-aSmf ple -thOiLs'fh2e.-5,-3-,;.-.,…,,-,,,,,.,,,-,..,, Standard &; Poor's 500-stock index also closed at record highs wIth the NASDAQ OTe Industrial Average posting a new 52-week hIgh but, as dIscussed last week, still tradmg below its June 1983 hIgh The arbItrage traders gave stocks a bIg push thIS week by bidding up the popular Standard & Poor's stock-mdex futures to record highs exaggerating the usual spreads between these future contracts and the underlYIng stock Indexes. These hIgh premiums In turn triggered the selling of these future contracts and the bUYIng of the related stocks. But what continues to fuel the stock market IS the expectation of lower long-term mterest rates. Thirty-year Treasurys are now at a ten-year low currently selling below eIght percent. Tills has not gone unnoticed in the Investment bankIng commumty as corporations lined up and sold billIons of dollars of new debt instruments this week. CUMULRTIVE NYSE PREFERRED STOCK BERDTH lNDEX DJIA DRILY CLOSE CUMULATlVE NYSE COMMON STOCK BERDTH INDEX PlCTTED Ttm.01 13 IgaS ' JAN as JAN 86 The strength of thIS interest sensitive sector in the stock market can be dramatIcally shown by examming a traditional technical tool–market breadth–m a slightly different manner. As this letter has pomted out, market breadth measurements continue to confirm the new highs in the averages. The NYSE for some SIxty years have recorded the advances, dechnes and unchanged of all Issues traded. More recently breadth fIgures have become available for common stocks only. This new series constructed as a breadth Index (advances-declmes diVIded by total issues traded) IS shown m the low- er third of the chart above. As expected thIS common stock only mdex behaves similarly to the tradI- tional total issues breadth Index. By subtractIng common stock issues from .total Issues traded we are also able to develop a preferred stock breadth mdex. Thls interest-sensltive mdex IS shown above in the upper third of the chart. Both of these breadth indexes are compared to the DJIA In the mIddle of the chart from pre-1982 low to date. It IS interestIng to point out that the common stock breadth Index spent most of the second half of 1983 declining while the DJIA went on to a new hIgh in November 1983. ThIS divergence was fol- lowed by a correctIon of 15.39 In the DJIA lasting untIl July 1984. The preferred stock breadth Index durmg this period, however. went to a new high reflectmg the ongoing strength In the mterest- senSItive sector during tlus declme. From the July 1984 low to date the DJIA has advanced without major interruption 61.40. During this period the strength of the common stock breadth index has been consistently ImproVIng, confirming each new hIgh in the averages WIth a new hlgh m breadth. What is most remarkable however. IS the relatIve performance of the preferred stock breadth mdex. Clearly reflecting the tremendous relative strength m the Interest-sensItIve sector of the market, this unique index should be monitored closely to reflect any loss of momentum WhICh, In turn. mIght be a precursor to a loss of momentum In the general market. Dow-Jones Industrials (1200 p.m.) S & P Composite (12 00 p.m.) Cumulative Index (1200 p.m.) 1769.52 234.53 3046.38 ROBERT J. SIMPKINS. JR. DELAFIELD. HARVEY. TABELL INC. No Statement or epresslofl of opinion or any other matter herein contained IS or IS 10 be deemed to be dlreclly or Indirect lv, an offer or the soUcltal1on of an oHer to buy or sell any secutlly referred to 01 mentioned The matter IS prosented merely for the convemence of the subscriber While we believe the sources of oUllniormallon 10 be retmbte, we In no way represent or guarant!!t! Ihe accuracy thereof nor 01 the statements made herein Any acllon to be taken by the subscllber should be based on hiS own investigation and mformat,on Delafield, Harvey, Tabelt InC, as a corporation and lIS officers or employees, may now have, or may latel take, poSitions or trades In respect to any socurities men\loned In thiS or any future Issue, and such position may be dltloront Irom anyvlOws now or hCloaf1or epressed In thiS or any other Issue Delafield Harvey, Tabelt Inc, which is registered With the SECas an Inestment advlsor.maY9lve advlcOlo 115 Invostment adVisory and other customers Independently of any statements made In thiS or III any other Issue Further Information on anv seculity mentioned herein IS available on request

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