Tabell’s Market Letter – August 08, 1986

Tabell’s Market Letter – August 08, 1986

Tabell's Market Letter - August 08, 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) 9B7-2300 It would require a sublime stretch of the imagination to find anything particularly impressive in last week's stock market action. Essentially, it consisted of the market's grasping at a brand new straw—the machinations of the assorted Sheiks of Araby to prevent the price of 011 from faUing into the single-digit range. TheIr agreement to cooperate for two whole months had the market up some twenty pomts at midday Tuesday before it fell back. Wednesday's and Thursday's action demonstrated mild firmness but no particular follow-through. From the technician's pOint of view, the various averages did, indeed, spend the week engaging in some fairly important testing of prior lows, and they emerged from that test wlth a passing grade, although that grade would have to be a great deal closer to a C minus than an A plus. The two previous important closing lows on the Dow were 1735.51 on April 7th and 1758.18 on May 19th. The August 1st close of 1763.64 left those two prior lows intact. Intra-day, the May 19th bottom of 1746.53 has been penetrated twice, on July 30th and on August 4th, but in both cases rallies at the end of the day kept the closing figures intact. The S & P 500 has even managed to act a bit better than the Dow, not having posted a new low since July 15th, whiCh bottom also managed to remain above the April-May figures. This, undoubtedly, is due to that index's Utility component. The action of the S & P 400 has almost exactly paralleled that of the Dow and, indeed involved a modest new closIng low in mid-July. Meanwhile. the averages' third major component, the Transport issues, continued to Sink like a stone, with the DJTA posting a new intra-day bottom of 697.13 on Monday. This constitutes a fairly impressive 17.3 decline since March 31st. The saving grace here, however. may be that the most pessimistic downside objectives for that average's top are begInning to be run out. 670-655 is about the worst downside target that can be read. Breadth action additionally continues to be abysmal. Our breadth index is now down more than was the case in Novemb.!',…!183 , ..which drop presaged the 1983-84,correction andJulLIIlaoexceededits … decline of July-November 1985. one of the deepest declines ever later erased. The divergence from the April 21 breadth high has now lasted 76 days. Some modest grounds for optimism may be found in the following table, Which updates a study published in this space in early July. That study, based on trading through June 30th, three days before the DJIA high, tallied the number of stocks that had made highs in March, April, May – mid-June, and mid-June to the date of the stUdy. We updated the study this week to inclUde trading through August 1, and the results are of moderate interest. DATE OF HIGH NUMBER OF STOCKS 6/30 8/1 -DIF-F March April May I-June 13 June 16-Aug. 5 341 297 301 367 320 -21 247 -50 242 -59 490 123 EXTENT OF DE C LIN E 6/30 8/1 6/30-8/1 24.6 18.8 14.0 4.3 31.3 26.6 24.3 12.6 -8.8 -9.6 -12.0 -8.7 First of all, the number of stocks making highs in the March – June 13 period has dechned by 130, and the highs from June 16 – August 1 surpassed those of June 16 – June 30 by 123 (there were seVen delistings). 198 of the 490 stocks posting recent highs managed to do so after the Dow peak on July 2nd, and it is interesting to note that 93 of those 198 stocks were Utilities, including the vast majority of listed issues in the industry. At first glance, It would seem to be suggesting that market leadership has narrowed even further down to this single market sector. What is interesting. however. is the average decline shown by the four groups of issues on June 30th and then August 1st. The figures are not all that different, as the computed average July declines show. and indeed the declines for the first three groups are about the same. with the stocks that made highs early having declined less during July than those making later peaks. The stocks making recent highs are, as could be expected, an exception. The figures. it seems to us. have at least some suggestion in them of a rotating correction, one where some issues. at least. are close to completing their corrective phase. This could be an indication that the market might complete the corrective process it is now in by using up time, rather than demonstrating further violent action on the downside. This thesis could be confirmed if the lows mentioned above were able to hold. and the market were then. following this test, able to produce a fairly decent rally. AWTvf! Dow Jones Industrials S & P 500 Cumulative Index (August 7, 1986) 1785.71 237.42 3020.34 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL, INC. No stal0ment or expression of opInion or iJny other matter herem contained IS or IS \0 be deemed \0 be directly or indirectly an offer or the soliCitation 01 an offer to buy or sell any security mferred 1001 mentioned The matter IS presented merely tor the convenience o11hesubscnber Whlle …. e believethesDurces of our information 10 be reliable we Inno way represent or guarantee the accuracy therool nor 01 the statements made herem Any action to be taken by the subSCriber should be based on hiS own Investlgallon and Information Delafield, Harvey labell Inc. as a corporation and Its officers or employees, may now hae or may later tare positions or trades In respect 10 any securities mentioned In thiS or any future ISSue, and such pOSition may be dillerenl from any ICWS now or hereafter c,prCsscdlll Ihls or ilny other Isue Delafield Harvey TilbcU Inc whiCh IS registered With Ihe SEC as an Investmenl adVisor may give adlce to Its Investment adlsory and olher customers Independently of any slalements made In thiS or In any olher Issue FUrlher Information on any security mentioned herein IS available on request

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