Viewing Month: July 1986

Tabell’s Market Letter – July 03, 1986

Tabell’s Market Letter – July 03, 1986

Tabell's Market Letter - July 03, 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 July 3, 1986 It has been the thesis of this letter for some weeks now that the stock market underwent a transition – f – –12…8 ne b!tvior patteF!! abqut,.Jhree mQl)!lJL8cgQ.J\.t-.beqaYiopattern9!l.l2..-Lech(l.acterid-;-sa…tr,enl whose direction. for the time beIng at least. 'continues upward. but in 8 rnu-ch slower and-narrower fashion. This week's market action was entirely consistent with this hypothesis. The first three days of trading all saw new peaks for the Dow, but Wednesday's interday high of 1922.67 was less that 4 above the comparable figure posted over three months ago on March 27th. That March 27th peak, for most averages. was followed by three subsequent new highs. in mid-April, early June, and. lastly. this week. We attempted, this week. to examine the four-month period March-June in terms of the action of individual stocks. We examined 1306 NYSE issues and recorded the date on which each one made its high for the period, the date and percentage decline to the subsequent low, and the portion of that decline recovered as of Monday's close. Despite the action of the averages, individual issues have not behaved all that well over the past four months. Almost half of the stocks under study made highs in MarchApril, which they have not been able to exceed since. The average stock, for the period, posted a 15 loss from its high to its subsequent low and had, as of Monday, recovered a modest 40 of that loss. DATE OF NO. OF AVERAGE HIGH STOCKS DECLINE March 341 24.64 April 297 18.78 May I-June 13 301 14.02 June 16-Date 367 4.31 Total 1306 15.15 10 -8- 22 108 340 478 EXTENT 10-20 20-30 138 115 179 66 144 39 25 2 486 222 OF D ECLINE 30-40 40-50 50 48 15 W- 23 3 4 5 23 0 00 76 20 24 The table above records some relevent statistics. It shows the number of stocks reaching their March-June high in four periods–March, April, May 1st-June 13th and June 16th-June 30th. The second Jorcolumn shows the average decpne eacp grDupL.stocks-B.nd-1he-nurnber–Of.stookswhich-dtopped-by– various amounts.. While the number of serious declines is small, the large number of Issues which peaked early and subsequently exhibited dips in the 10-30 range is striking. DATE OF NO. OF AVERAGE HIGH STOCKS RECOVERY 20 March 341 30.86 135 April 297 38.84 79 May I-June 13 301 35.66 103 June 16-Date 367 50.45 77 Total 1306 39.29 394 EXTENT 20-40 40-60 101 60 82 71 77 55 63 74 323 260 OF RECOVE R Y 60-80 80-100 36 9 50 15 48 18 74 79 208 i l l The table above focuses on the amount of recovery, and that recovery is, in our view, surprisingly limited. The stocks that made their highs through June 13th have, on average, been able to regain only 35 of the ground lost, and almost a thIrd of them have recovered less than 20. What is also interesting is the persistence of declines in these Issues once individual highs were made. Of the 341 issues which made their high in March, 145 were still posting new lows subsequent to June 13th, and the same is true of 103 of 297 stocks that peaked in April. What evidently exists, therefore, is a rise in the averages being supported by an ever decreasing number of issues. This condition, of course, need not be permanenL Rotation of leadership could take place if stocks that peaked early in the perIod complete corrections and move on to new highs. The point of the study above, is that they apparently, to date, have not done so. AWTvfJ Dow Jones Industrials 1902.84 S & P 500 251.84 Cumulative Index (July 2, 1986) 3217.32 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL, INC. No statement or expression of Opinion or any other matter herein contained IS or IS to be deemed to be dlrectfyor Indlrectfy, an olfer or the soliCitation of an offer to buy or sell any secunty referred to or mentioned The mattor IS presented merely for the convenience of the subscriber While we believe Ihe sourcesot our Information to be reliable, we In no way represent or guarantee the accuracy thereof nor ollhe statements made herein Any acllon to be talen by the subSCriber should be based on hiS own IOvestlgatlon and Informal Ion Delafield, Harvey, Tabell Inc, as a corporation and liS officers or employees, may nolV have or may tater take, POSitions or trades In respeclto any securities mentioned In thiS or any future Issue, and such POSition may be different from any views nowor heleaftcr expressed In thiS or any other Issue Delafield Harvey,labell Inc, which IS reglslered With Ihe SECas an Investment adVisor, maYQlve adVice 10 Its Investment adVISOry and other customers Independently of any statements made 10 thiS or In any other Issue Further mtormatlon on any secuflty mentioned herein IS avaIlable on reQuest

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Tabell’s Market Letter – July 11, 1986

Tabell’s Market Letter – July 11, 1986

Tabell's Market Letter - July 11, 1986
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'1l'LiUIEUEIL.n.s LiUIRl t;EV n. E V V E IRl 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE. INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – – July 11. 1986 We have spent a great deal of time of late minimizing the importance of the multi-point declines (and advances)which havebeen-pr-ov4dmg.,fodder cfornewspa per headlinesformuch cof1986.,.,..l tLis'not; q uite, so easy to do this in the case of the 62-point. 3.25 plunge on Monday. especiallyin light of the further downside action the following day We could, of course, point out that Monday's fall ranks only 88 the 163rd largest drop since the Dow emerged in its current form in the 1920's. There have, however, been only nine larger ones in the post-World-War-II, modern era. The timing of their occurance does not tell us a great deal. Five occured in reaction to totally unexpected outside events, two in response to the Truman election in 1948, two in response to the outbreak of the Korean War in 1950. and one following the Eisenhower heart attack in 1955. Two others. May 1962 and November 1974. occurred preceding. but close to, important cycle bottoms. October 25. 1982 was a correction, erased in a couple of weeks. of the sharp advance that had started in August. Only one. November 26. 1973 was the start of an important market decline. Enough. however. of interesting facts probably not worth knowing. It is certainly a requirement at this stage to examine just what effect the rather spectacular events of the past week may have on the market outlook. Our readers are aware that we have been pointing out since May the various changes. not for the better. that have been occuring in the technical market picture since the first quarter of this year. This week's action must first be viewed. we think. as another link in the chain of evidence suggesting internal deterioration. It occured t we are duly informed. in response to the assertion by two respected forecasters of the existence of a relatively high degree of short-term market risk. The sensitivity of the market to these forecasts demonstrates. we think. its current fragility. We suspect that both John Mendelson and Bob Prechter would agree that they could. theoretically at least. have made these assertions in another sort of environment without the immediate effect having been anywhere near 8S great. We find ourselves, we admit, being unable to take serious exception. except perhaps in degree. to the forecasts involved. Twenty percent is. after all. the normal threshold for a bear market. and the week's events should not destroy the memory that we made a new high in a forty-seven-month-old bull market as recently as last Wednesday. Quite simplistically. bearmarkets ormallyfollow bull markets. RecentlsBues oftniSletter have been nobng some ofthe similarities of -the current era to the . first part of the 1921-1929 period. a market expansion whose central feature was the lack of any bear market in the normal sense. Thus the ultimate emergence of a cycle downswing at some stage would be neither surprising nor unhealthful. We must confess. however, some doubt about the immediacy of the prospect. This week's break brought us out of a clearly defined top. the downside targets of which seem to center around 1770-1760. A basic question, in our view, is whether the market will be able to hold in that area and mount. at least. a further test of the former highs. Should it fail to do so. the immediate-bear-market thesis would certainly have to be granted increased validity. We think. however. that there is some likelihood that the final break may be delayed. The major factor giving force to this view J we think. is the patterns on individual stocks. especially the defensive, disinflation-beneficiary issues which have constituted market leadership during almost all of the bull's second phase. Serious market weakness arises from a combination of exploited stocks and major distributional patterns. The disinflation-hedge stocks. from a technical point of view. and to some degree from a fundamental one also. may be said to be exploited issues. What they do not possess is major distributional patterns along the lines of the niftyfifty in 1973-74. We also find ourselves unable to concur with various warnings that increased speculation is suggesting an imminent market decline. The NASDAQ Industrial Average is up from its September low less than is the Dow and has just barely exceeded its June. 1983 high. achieved when the DJIA was around 1250. Secondary offerings have indeed increased. but to those of us old enough to recall real new-issue booms. the current atmosphere seems fairly tepid. None of this is an attempt to ignore the real signs of technical weakness that have been manifesting themselves over the past four months. which we—and our colleagues—have regularly been pointing out. Nor is it an attempt to suggest that any further amazing upside potential exists in what can be agreed to be a well-exploited market. It is simply a suggestion that market crosscurrents may, indeed. continue for a while. -…….– — w–……………. — — — .. — —. In such a market. indeed. the indiVidual investor's reaction is often best determined by that investor's own frame of mind, as illustrated by the old story of the stockholder who confessed to his psychologist that he could not sleep at night for worries about his stocks. Sell was the doctor's advice. and the investor asked. How muchtI. To the sleeping-point was the reply. AWTvfl ANTHONY W. TABELL DELAFIELD. HARVEY. TABELL. INC. Dow Jones Industrials 1830.99 S & P 500 242.85 Cumulative Index (July 10. 1986) 3122.63 No statement or epresslon of opinion or any other matter herein contained IS or IS to be deemed to be, directly or indirectly an oller or the soliCitation ot an ofter to buy or sell any security referred loor menl!oned The matter IS presented merely lor the convenience of the subSCriber While we believe Ihe sources of our tnformatlon to be reltable, we In no way represent or guarantee Ihe accuracy thereof nOf 01 the statements made herein Any action to bfJ taken by the subscnber should bo based on hiS own Investigation and rnformatlon Delafield, Harvey, Tabell Inc, 8S a corporation and lis oHlcers or employees may now have, or may later take, pOSitions or trades In respect to any securities mentioned In thiS or any fulure Issue, and such POSition may be dlflerenthom any views now or hereafter e1pressed In thiS or any othellssue Delafield Harvey, TaOOIl Inc, which IS registered With the SEC as an mvestmefll adVisor, may give adVice to ItS mveslmenl adVisory and other customers mdependently of any statements made m thiS or In any other Issue Further mlormallon on any security mentioned herem IS available on reQuest

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Tabell’s Market Letter – July 18, 1986

Tabell’s Market Letter – July 18, 1986

Tabell's Market Letter - July 18, 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 July 18. 1986 The most significant fact about the current stock market is that it made a new high on July 2nd. —-Thatt8.tementi8,ofcourseliberately-'aimedatprovXmtionHere…Lwe-have-a -markethich h a r – – – – …. –.!!' – ,..– undergones 6IT-point down day, was. at mid-week. down almost 150 points from that Bforementioned -high. and we are babbling about new highs two and 8 half weeks ago. Yet we reiterate the fact that the eleventrading-day-old high constitutes at the moment a more useful fact for determining investment policy (as opposed to a forecast) than the decline which followed it. Let UB step back a bit and review what has happened. First of all. the market has declined 7.35 between July 2nd and July 15th. There. That should make us feel better already. We have still. of course, not gotten over the culture shock of having the DJIA as high as it is. 150 points, of course, seems like disaster. 7.35 sounds like the minor decline that it. in fact, is. Furthermore, it gives us a historical benchmark. If we go back forty-four years. to April 1942, we find the recent drop was the 48th of equal or greater magnitude in those 44 years. It seems, perhaps. a more important occurance than it is. since it follows the third longest period, 490 days since July 24. 1984, without such a decline. (The three longer periods were October, 1962 – May, 1965, November, 1943 – February, 1946, and September, 1953 September. 1955). We return to the importance of that July 2nd high. Of the forty-seven similar highs that preceded it. thirty began from what we now know by hindsight to have been new highs within the context of bull markets. something we can all agree was the case on July 2nd. Of those thirty. ten constituted the final new highs in the bull-market of which they were components. Following the other twenty. the bull market in question went on to new peaks. Given the length of the current advance, it is probably unwise to translate this into two-to-one odds in favor of an ongoing upswing. but the statistic should, at least. be comforting. Let us, however. assume the W..oe'lcenariLBruLassume……that…J.nly-2nd.-1986 ……turnsout to..be,ttlhe, bull-market high. What sort of market action may be expected over the next few months The following table, while somewhat arcane, attempts to provide answers to this question. It gives the 10 dates over the past forty-four years when a 7.35 decline marked the start of a cycle bear market. It then shows the last date following the bull market high on which the Dow remained within 2. 5. 7 and 10 of its peak. The figures in parentheses are the number of trading days following the high. For perspective, in current terms. down 2 is equivalent to 1871, 5 to 1814, 7 to 1776, and 10 to 1718. BULL MARKBT HIGH LAS T Z DAT B WIT H I N A G I V B N 'II 0 F HIGH 5 7 10 May 29. 1946 Jun 15. 1948 Jan 5. 1953 Apr 6. 1956 Dec 13. 1961 Feb 9. 1966 Dec 3. 1968 Jan 11. 1973 Sep 21. 1976 Apr 27. 1981 Jun 17. 1946 (12) Nov 1. 1948 (lOll Mar 25. 1953 (55) Jul 26. 1957 (328) Mar 19. 1962 (65) Feb 17. 1966 (6) May 16. 1969 (109) Jan 12. 1973 (ll Jan 3. 1977 (7ll Jun 23. 1981 (40) Aug 15. 1946 (54) Nov 4. 1948 (103) Apr 2, 1953 (66) Aug 9. 1957 (338) Apr 6. 1962 (79) Apr 26. 1966 (52) May 29, 1969 (128) Jan 26. 1973 (10) Mar 17, 1977 (123) Jun 30, 1981 (45) Aug 23. 1946 (60) Feb 3. 1949 (172) Aug 18. 1953 (158) Sep 3. 1957 (354) Apr 25. 1962 (91) May 2. 1966 (56) Jun 9. 1969 (124) Oct 29. 1973 (20ll Apr 18. 1977 (144) Aug 6. 1981 (7ll Aug 26. 1946 (61) May 19. 1949 (264) Sep 9. 1953 (173) Sep 19. 1957 (366) May 8. 1962 (100) Jun 24. 1966 (94) Jun 18. 1969 (131) Nov 1. 1973 (204) Jul 25. 1977 (21ll Aug 20. 1981 (8ll What the figures show, in effect, is that, in seven of the ten bear markets. the Dow returned to within 2 of its high over periods ranging from two to fourteen months. In nine cases it had returned to within 5 of that high within similar periods. and in all cases shown. a recovery to within 7 of the bull market high ultimately took place. The fastest-breaking bull market was 1973-1974, which fell from 1051.70 in January to 869.13 in June. It had recovered by October, however, to 987.06. By contrast the top between April 1956 and the Bummer of 1957 took over a year to form. – Now none of the above is intended to suggest blind optimism in the face of the market deterioration which we have been pointing out over the last two months. What it does suggest is that. even allowing for the most peSSimistic possible view of that action, that it is the immediate precursor of a cycle bear market. extensive further deterioration will have to take place before such a bear market is likely to take us significantly below current levels. History suggests. in other words, that the two-week-old new high which we mentioned at the beginning of this letter constitutes an argument against precipitous action. AWTvfi ANTHONY W. TABBLL DELAFIELD. HARVEY. TABELL. INC. Dow Jones Industrials 1768.14 S l P 500 234.52 Cumulative Index (July 17, 1986) 3068.56 NO statement or C/preSslon of opinion or any olher mAtler herein contained IS or IS 10 be deemed to be directly or indirectly. an offer or the soliCitation 01 an alier 10 buy Of sell any secuflty referred loor mentioned The mailer IS presented merely lor the convenience of the subSCriber While we believe the sources of our mlormatlon to be reliable, we In no way represent or guarantee the accuracy thereof nor 01 the statements made herein Any action 10 be taken by the subscriber should be based on hiS own Invesltgatlon and Information Delafield, Harvey TaOOIl Inc, as a coroorallon and ItS oU,cers or employees may now h.!ve or may later take pOSitions or trades U1 respect 10 any secunlles mentioned In thiS or any future Issue, and such POSition may be different from anv views nowor hereafler epressed In thiS or any other Issue Delafield Harvey Tabell Inc which IS registered with the SEC as an Invesmenl adVisor may give adVice 10 liS investment adVisory and olher customers mdependentlv of any sl alemenls made In thiS or In anv other Issue Further information on any securltv mentioned herein Is available on reQuest

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Tabell’s Market Letter – July 25, 1986

Tabell’s Market Letter – July 25, 1986

Tabell's Market Letter - July 25, 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 – July 25, 1986 We suggested in this space two weeks ago that the downside objectives of the top formed just prior ,-.tp.,1heshap ,J.uly.1.1h.b.eemedtocepterarqutl(t th.1.J70;J.Z6 Oar.ea ,B yJ!11yHjh, theind exhad reached that area, with a 1768.70 close, and has, so far at least, attempted to hold that low, -rising to 1798.37 on Wednesday, before pulling back in Thursday's trading. Continued action of this sort would be constructive. The Dow presently finds itself testing two fairly important previous bottoms, one at 1758.18, on May 19th, and the other at 1735.51, on April 7th. Continued ability to hold above these benchmarks would have to be construed as a positive sign .. It is. ironically. often difficult to poinpoint something so simple as a downside penetration. Both prior lows were made on spikes. where the average dropped to 8 new bottom and then rebounded sharply. Thus a short-term, one-or-two-day penetration of the figures mentioned above should not be immediately regarded as bearish evidence. Meanwhile. as the daily Wall Street Journal market chart quite clearly shows, the relative action of the widely followed DJIA lies precisely in the middle between its siblings, the Transport and Utility Averages. The Industrials have posted three bottoms at approximately similar levels as outlined above. For the Transport Index. the same three bottoms reveal a sharp downtrend, whereas, since May at least, the Utility Average has shown no disposition to correct and finds itself, as of mid-week, at a new bull-market high. None of this, of course, is really anything more than further evidence of the phenomenon we have been remarking on all along. Since March, the market has tended show a far less pronounced overall uptrend and to become less broad, i.e. to produce more and more widely disparate price movements by individual stocks. As downside targets were being reached, some mOderately positive signals were being flashed by a number of short-intermediate term indicators that in the past have demonstrated fair predictive accuracy. Coincident with the low of July 15, the 10-day advance-declIne total, one of the most widely followed short-term oscillators, reached -3,140. This could hardly be considered deep oversold territory amounting, as it does, to 15.8 of total issues traded. A deep oversold condition for this indicator, generally attained at major market bottoms, would be around 25, or, given the 2,000 plus -I-''6sues-t-hat–'-l1opmally—t.pa.Ge–Elaily-40EJa.YTll-PeUn-El…the,,-5TOOO.Llevelhe–leveh;at-tained..–however,can-'-be-,…–I considered as a normal oversold one for a neutral market, something which. for the time being at least, we are assuming this one to be. The same sort of action, suggesting a moderately deep. but not extreme, oversold condition, was being shown by the short-term trading index, the familiar advance/decline-up volume/down volume ratio, invented by Richard Arms and available on all quotation machines. This indicator is massaged by many technicians in many ways. We have found that the combination of a close above 2.00, coupled. within a three-week period. by a ten-day average moving above 1.25, has had some use as an indicator of short-term bottoms. Such an occurance took place early this month when the index closed at 2.81 on July 7th and its 10-day average spent July 15 – July 18 above the 1.25 level. This was the 27th occurance of this particular conjugation since 1964. Measuring market change two months afterward reveals 18 advances and 8 declines on the 26 prior occurances. The average for the 18 advances was 6.5 with the largest being 13. The 8 declines averaged 3.7, the largest being slightly over 8. The overall average for all occurances was a 3.4 gain. If this indicator turns out to be correct in presaging a rally over the next two months it would, of course, be consistent with the sort of scenario outlined in last week's letter, which suggests that, eVen if the market is in fact topping out, a test of the previous high at 1909 on the Dow would be a minimal expectation. Such a test would also be consistent with the normal summer-rally tendency. What might follow. of course, remains undetermined. MeanWhile, as action grows more diverse, the problem of individual stock selection has become increasingly difficult. We noted a fortnight ago a basic paradox of the current market. Those stocks which have produced excellent advances and might therefore be thought to be technically vulnerable do not. by and large. have tops. Those stocks which have topped—and there are an increasing number of these—do not seem, for the most part, to be particularly extended. The policy of sticking with winners, in other words. has paid off. However, it becomes more and more difficult to become excited about a market where-new leadership consistently fails to'present itself – – If the above discourse suggests that the market is awash with crosscurrents, it is indeed intended to do so. We do not think. as we have indicated before, that the nature of the process in Which we are now engaged is totally clear, and we think additional evidence will accumulate in the trading pattern to be built up over the remainder of the summer. We prefer to await that evidence, however, before suggesting major changes in investment policy. AWTvfl ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL, INC. Dow Jones Industrials 1809.48 S & P 500 239.27 Cumulative Index (July 24, 1986) 3058.41 NO statement or eDf(!SSlon of opInion or any other melller herein contained IS or IS to be deemed to be dlrectlvor indirectly an ofler or the soliCitation of an oller to buy or sell any security referred to or mentioned The malter IS presented merely for the convenience of the subscnoor While we believe lhe sources 01 our information to be relmble, we In noway represent or guarantee the accuracy thereof nor of Ihe slatement made herein Any aCllon to be taen by the subSCriber should be based on his own investigation and Informal Ion Delafield, Harvey, labelt Inc, as a corporation and ItS ollicers or employees may now have or may later take positions or trades In respect 10 any securilies menlloned In thiS or any future Issue and SUCh POSition may be different Irom any Views now or hereafter expressed In thiS or any other Issue Delafield Harvey Tabel! Inc which IS registered WIth the SECas an Inveslment adVisor may give adVice to ItS Investment adVisory and other customers Independentty 01 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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