Tabell’s Market Letter – July 03, 1986

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