Viewing Month: October 1986

Tabell’s Market Letter – October 09, 1986

Tabell’s Market Letter – October 09, 1986

Tabell's Market Letter - October 09, 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) 9872300 , , ' October 9, 1986 One more time, and then we promise to shut up. This is by way of introduction to I-I—-'the-fifth -(and-,we-hopey-the-final)lettero-in'the'serieswhich –began-some,eight-mont-h S–…–.,….,–.,. ago.' comparing tlie currerit stock-market/economic environment to that of the 1920's. Let us begin by quickly recapitulating the major points made in the prior four letters. We started out by noting the uncanny similarities of the market advances of August, 1921-March, 1923 and August, 1982-November, 1983. These two advances produced two equally similar corrections in March, 1923-0ctober, 1923 and November, 1983-July, 1984. This behavior was followed by renewed dynamic rallies in both eras, the current one falling slightly short of its 60-year-ago predecessor. We also noted some resemblance in the economic environment of the early twenties to that of the early eighties. Both featured the culmination of a quarter-century of inflation, followed by relative price stability. We noted that both bull markets represented, in part, a flight from real to financial assets and that both depended, to a degree, on the availability of an ample supply of credit—for margin debt in the 1920's and for credit-financed takeovers in the 1980's. Three additional points, we think, need to be made. First, the companson needs to be brought up to date, and it must be noted that the process of following in the 1920's footsteps can be seen as continuing. Let us compare the two benchmark dates of February, 1926 and March-April, 1986. The former showed the Dow Jones Industrial Average making a new high at 162.31, followed by a plunge to 135.20 in late March. This dip was followed by no less than four tests of the February high, in August-September, 1926 (when it was exceeded slightly), December, 1926 and MarCh, 1927. It was from that point that the market launched its nowinfamous advance to September, 1929. We will be the first to admit that there are differences between 1926-7 and the I—,.e-.-m,,,pl,eL we-'-he-seen—sineeing-,-ntably–'–theact-t-hat–t-he-e'I'ly—16-d1'Op-4n-,-1I\arch-o,—-I– 1926 created a range much wider than today's, where the April low is only 9.6 below the high. Both markets, however, can be defined as trading ranges possessing a slight upward bias. The second point concerns the likelihood of a repetition of the 1927-1929 experience, Which, as we previously noted, would carry the Dow to the 4000-5000 range. Our readers will know that we are not now ready to take a firm stance on this point, since we feel that the nature of the 1986 trading range is a still-unanswered question. We admit, however, that we would be concerned about the possibility of an immediate (2-3 years) rise of such a magnitude, since we fail to see the economic Justification for such an advance. We would, in other words, almost rather see a normal bear-market, cycle correction, which could then clear the way for better prices without overextension. Finally, we must assess the possibility of a repetition of the post-I929 experience. Of one thing we are certain. If it comes. it will arrive in a form sufficiently different from 1929 to cause most of us to be unprepared. The unwinding of over-leveraged balance sheets, for one thing, should be quite unlike the liquidation of margin debt which took place in 1929-1932. Furthermore, the monetary tools now available (tools largely developed in response to 1929-1932) are sufficiently sophisticated so that an exact repetition of that deflation, when the money supply was allowed to drop by one third, is unlikely to be repeated. There exists more reason, it seems to us, to question the fiscal tools available. The desirability of a balanced budget. now exemplified by Gramm-Rudman, can be considered to be part of conventional wisdom. This is undoubtedly justifIed after more than two decades of excessive Federal spending. However, the adequacy of monetary stimulus has never been tested under severe condItions, and it mIght be that, under such conditions, fiscal stimulus would be a necessary accompaniment. Deficits, in other words, might be not bad medicine but simply medicine long overabused. This we see as a possible chInk in the protective armor. Finally, we will once again stress that no prediction is implied by this letter or its predecessors. As usual, the stock market itself will provide us In its follow-on to the current sideways market, with the first clue as to whether history is repeating itself. AWTccg ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL INC. Dow Jones Industrials 1792.74 S & P 500 235.89 Cumulative Index (October 8, 1986) 3077.83 NO statement Of expression of opinion or any olher matter herein contalnoo IS or IS to be deemed to be directly or indirect lv, an olfer or the soliCitation 01 an offer to buyor sell any security retorted to or mentioned The matter IS presented merely tor Iheconvcnlencc of the subSCriber While we believe the sources of ourmlormatlon 10 be reliable, we in no way represent or guarantee the accuracy thereof nor ot the statements made herein Any action to be taken by the subSCriber Should be based on his own investigation and information Delafield, Harvey labelt Inc, as a corporation and ItS officers or employeos may now have, or may later take pOSitions or trades In respect to any securities mentioned In thiS or any future Issue, and such poslhon may be dlflerent Irom any VICWS now OJ hClealter cpressed In thiS or any other Issue Delafield Harvey, labelt Inc. which IS registered With the SEC as an Investment adVisor, maYQlve adVice to Its Investment adVisory and o\he' customers Independently of any statements made In thiS or In anv other Issue Further information on any security mentioned herein IS available on request

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Tabell’s Market Letter – October 16, 1986

Tabell’s Market Letter – October 16, 1986

Tabell's Market Letter - October 16, 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 October 16. 1986 We have used many issues of this letter over the summer to describe the trading range which has confinedthELDow-since.-early-ihiS-year.—-J.t…is…-1hexefore.-perhaps.appr.opriate to consider it….vJsually…. . To depictthisaction. we have chosen point-and-figure charts of the three major Dow-Jones Averages. using a 10-point unit for the Industrials. 5-point for the Transportation and I-point for the Utilities. This approach illustrates both the hope and fear engendered by the current stock market pattern. We have chosen March 27th as the beginning of this range since, on or around that date. almost all major indices were in gear on the upside. The Industrial Average chart. shown below, specifies the dates of the four major tops and the four bottoms that have constituted the range. so far. There are, thus. within the range's confInes, four completed short term down moves and three completed upward moves with a fourth probably now underway. These individual moves have been rather small, ranging from 4.73 to 8.85. In time. the downswings have lasted between 6 and 21 days and the upside swings from 10 to 31 days. Typically. each downward move has been shorter than the upward one which preceded it. We have been describing this 'pattern as a trading range with a slight upward bias. and as far as the DJIA is concerned. we think thIS remains correct. The other two Averages. however. have each proceeded on their own merry way, independent of the Industrials and, interestingly enough. in precisely opposite directions. The Transportation Average shown at left below is a discernably different pattern. After peaking at 830.84 (with the Industrials around 1820. the Transport Average failed to score a new high in April and collapsed on August 4th to a new low. down almost 15 percent – from-its-peak;-ur-better-ttmntce-th'e-decllne-shown-by- the Industrials to that point. From this low. however, the carriers began a period of outperformance. actually reaching a new bull-market high this week. The pattern seems to us to constitute a fairly obvious head-and-shoulders base. and an upside objective of 885 appears called for. The Utility chart below. interestingly. looks like the Transportation Average turned upside down. At March's end when the Transportation was peaking and the Industrials showing their flrst top. the DJIA had reached 193.73. There was a slight correction during April. but. a week before the September top. the index had reached 219.15. From that point. a free-fall decline took it to 198.78. a level which continues to be tested. The potential top pattern suggests at least a decline to the 190-180 support area where the Average traded throughout April. The hope for the stock market. it seems to us, lies in the diversity of these patterns. Presumably, the Transportation index has already completed an intermediate-term correction, and the Utilities are well on their way to doing so. If this sort of process rotates from sector I;'\ITI!i! to sector and group to group. it could turn out that the market will complete a period of rotating leadership without severe damage on the downside and a significant number of industry groups-will wind up in new uptrends.- Fear for the market, however, arises from the Industrial's pattern. We have. on the chart above. presented the history since mid-1984 to illustrate how little support exists between current levels and 1200. We noted in mid-September that, if the formation were to be read as a top, the downside objectives could be well below current levels. Now. the recent pattern suggests a short-term uptrend with objectives of 1880-1910. yet another test of the former highs. If we are to read this as broadening of a top. the ultimate risk approaches fairly awesome levels. As we have said before. we prefer the security of a defensive position until this particular dilemma is resolved. ANTHONY W. TABELL AWTjt DELAFIELD. HARVEY. TAB ELL INC. Dow Jones Industrials 1826.35 S & P 500 238.34 Cumulative Index (l0/15/86) 3108.96 No statement or expreSSion of opinion or any other malter herem contained Is, Of Is 10 be deemed to be, directly or indirectly. an of/er or the soliCitation of an offer 10 buy or sell any security referred to or mentlonod The matter IS presented merel fOlthe convenience of Ihesubscrlber White we behcelhe sources 01 our information 10 be reliable we In no way represent or guarantee the accuracy therool nor altha statements made herem Any action to be taken by the subSCriber should be based on hiS own Invesugallon and Informallon Delafield, Harvey. label! Inc, as a corporation and 115 oUlcers Of employees, may now have or may later lal;e poSitions or trades In respect 10 any secUrities mentioned In thiS 01 any future ISSue, and such position may be different Irom any views nowOl heleafter expressed In this or any other Issue Delafield, Harvey, TabeTi Inc which IS registered wllh the SEC as an Investment adVisor, may give adVice lOlls Investment adVISOry and olhe' customers Independently of any sfatemenls made In thiS or In any othor Issue Further Information on any security mentioned herein IS available on request

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Tabell’s Market Letter – October 24, 1986

Tabell’s Market Letter – October 24, 1986

Tabell's Market Letter - October 24, 1986
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– – – – – – – – – ———,c—-.,.-,–,,—- —– ——…. –… …–,.. .'– – …. —-… TABELL'S MARKET LETTER 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (6091987-2300 October 24, 1986 In spite .a twenty- on performance of the stock market for the week to described as unimpressive. The current position of the market is smack in the middle of the often referred to trading range which has confined the DJIA from March of this year between a high of 1919.71 and a low of 1755.20. Within this trading range there have been four completed short term down moves and four up moves as shown in the table to the right, together with the percentage change and the length of each move. DATE DJIA CHANGE OF DAYS Closer examination of the market during this time period using Standard & Poors group indexes as a proxy shows an interesting process developing. 0 n the back page these Standard & Poors groups are ranked by percentage change best to worst for two periods, March 26, 1986 to July 30, 1986, and July 30, 1986 to October 22, 1986. Dividing the trading range into two separate periods dramatically demonstrates the diverse behavior of these Standard & Poors groups from one period to 3/27/86 4/07/86 4/21/86 5/19/86 7/02/86 8/01186 9/04/86 9/29/86 10/17/86 1821.72 1735.51 1855.90 1758.18 1909.03 1763.64 1919.71 1755.20 1837.04 0.00 -4.73 6.94 -5.27 8.58 -7.62 8.85 -8.57 4.66 o 6 10 20 31 21 23 17 14 the next. Reviewing the March/July rankings, we are aware of the continued outstanding performance in the consumer non-durable sector as reflected by the ten best acting group. Also the ten worst acting groups for the same period, although severely depressed, provide no real surprises. What is interesting, however, is the performance of these same groups from July 30 to October 22. 1 Steel 38.1781 2 Copper 36.7979 3 Personal Loans 34.2895 4 Gold 29.9145 5 Tires & Rubber 27.7657 6 Chemicals – Div. 20.3569 7 Oil Well Equip. & Ser. 18.4407 8 Truckers 18.0932 9 Canadian Oil & Gas 17. 2505 10 Forest Products 16.9716 84 Drugs 85 Retail Stores (Drug) 86 Soft Drinks 87 Retail Specialty 88 Cosmetics 89 Resta urants 90 Entertainment 91 Beverages Brewers 92 Savings & Loan Cos. 93 Toys -6.2315 -6.8254 -7.3735 -7.4176 -7.4478 -7.8510 -8.8105 -11.0862 -17.7156 -20.0714 The list above shows the percentage change of the ten best and worst groups for this period. New to the ten best list is the natural resource sector which includes groups such as steel, copper, chemicals and forest products. Another major sector which is showing improved relative performance is energy. Groups such as Oil Well Equipment (18.4), Oil Domestic (16.5) and Oil International (13.5) are technically positioned to assume new market leadership. Just as surprising for this period is the representation of the consumer non-durable sector in the ten worst performing groups. As this letter has pointed out repeatedly in recent weeks, there is a potential top formation present from this trading range with downside objectives substantially below current levels indicated. However, something is going on within the limits of this defined trading range. It is possible that this process of rotational leadership from sector to sectorand.groupto,group,cou1d–… — -evoivewithout major damage on the downside to the general market. bringing to the fore new leadership in sectors such as natural resources, energy and transportation. It might be premature to identify this process so early, and we should not lose sight of the potential technical vulnerability in the general market, but it must be monitored closely — RJSmmr ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials 1839.57 Standard and Poors 500 239.17 Cumulative Index (October 23, 1986) 3115.69 NO statement or eJO'presSlon 01 opinion or any other mailer herein contained IS or IS 10 be deemed to be, directly or indirectly, an offer or the SoliCitation 01 an offer to buy or sell any security relerred to or mentioned The matter IS presented merety lor the convenience of the subscriber Whllewe believe the sourcesol our information 10 beretlable, we In no way represent orguaranteelhe accuracy thereof nor of the statements made herein Any action to be taken by the subscriber Should be based on hiS own Investlgahon and information Delalleld, Harvey Tabell Inc, as a corporation and Its officers or emptoyees, may now have, or may later take pOSitions or trades In respect to any seCUrities mentioned In thiS or ant future Issue, and such POSition may be different from anyvle…'s nowor heleafter expressed In thiS or any other Issue Delafield Harvey Tabell Inc, which IS registered With the SEC as arllnvestmerlt adVisor, may give adVice to ItS Irwestment adVisory and othe' customers Independently of arly statements made In thiS or In any other Issue Further information on any security mentioned herein IS available on request

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Tabell’s Market Letter – October 31, 1986

Tabell’s Market Letter – October 31, 1986

Tabell's Market Letter - October 31, 1986
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TABELL'S MARKET LETTER ,I ,j – – — I 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS,INC (609) 9872300 October 31. 1986 ,– The .';eek'Siiiii'rket-strength has 'brought Tfie Dow to the' vicinity' orth i8'1W'iliHial 7' 0'-,….,.-,.,,,.,.1– upside objective suggested in this letter. The next step could be a full-scale test of the all-time highs. the success of which we would be inclined to doubt. All this. however. is seasonally fortuitous, since, as we discovered by accident some five years ago, the month of November, for some unfathomable reason, appears to have predictive value. Action for the month of November itself has been almost precisely normal. In the 89 years since 1897. the Dow has been up 54 times in November and down 35. showing a rise some 61 of the time. This is close to the 57 rising average shown by all one-month periods since the Dow was first constructed. What is interesting. however. is what has happened following the 54 past instances of an upward November. The following table summarizes some pertinent figures. Perlod Length In MOYlths ————1 2 3 4 5 -6 7, 8 '3 10 11 12 ALL PERIODS FOLLOWING UP NOVEMBER Avg l Avg l Petl.ds Pet'lods l Pet'l..ds Pet'lods l Ch All Chg Fr;.lv'oIlng Up De.wYl Up Up Down Up Pet'lc,ds Up NClvembt' ——- ——- —– ——- ——- —- ——- ———- 610 466 56.7 37 17 6'3 0.53 0.'30 613 462 57.0 33 21 61 1. 10 2.22 627 447 58.4 3' 20 63 1.67 2.04 636 437 5'3.3 36 18 67 2.23 3.75 658 414 61. 4 38 16 70 2.81 5.02 647 555 654 424 — ,1.1.5 415 60.4 51 , 61 -2- 35 -0- 39 1'3 . 2-P 15 65 3.41 53 — .3. '3'3 .. 72 4.56 4.47 4. 84 5.70 6'2 426 50.1 38 16 70 5. 16 8.72 548 41'3 60.7 38 15 70 5.77 7.5'3 646 420 50.6 34 1'3 54 6.38 7. 18 656 40'3 51. 5 34 1'3 54 6.'37 8.65 The table shows the history of all market periods of one to twelve months in length since 1897 and compares it with the 54 periods of like length following an upward November. Taking the first line as an example. of the 1076 one-month periods since 1897. the Dow was up in 610 cases and down in 466. thus showing a rise of 56.7 of the time. In the 54 Decembers following an upward November. however. the average found itself up 37 times and down only 17. thus rising 69 of the time. The average percentage change for all 1076 one-month periods was just over one half of 1. For the 54 periods following an up November. the average advance approached 1. The table may be read in the same way for all periods of lengths from two up to twelve months. — , A glance through the table will show that the predictive value of November appears to be quite uncanny. For all twelve period-lengths. the market produced a greater percentage of rising periods following an upward November than was the case overall. For example. it rose 70 or more of the time over periods of five. eight. nine or ten months compared with an expectation of around 60. Likewise. the average percentage change following an up November comfortably exceeded the average percentage change for all periods of similar length no matter what the length of the period in question. The average December-January chang.Jol1wing an upwardovember. for. example. ,was.2. 22 versus an exp..eced average of 1.10. Now none of the above says the market cannot go down after an upward November. and it has indeed done so on numerous occasions. Certainly there are large numbers of other factors detailed at length in recent letters which go into the formation of our present market opinion. Nonetheless, the November record is significant enough to be of interest. AWT It Dow-Jones Industrials (1200 p.m.) S & P 500 (1200 p.m.) Cumulative Index (10/30/86) 1871. 77 244.39 3158.25 ANTHONY W. T ABELL DELAFIELD. HARVEY. TABELL INC. No statement or epresslon 01 opmlon or any Olller matter herem contained IS or IS to be deemed to be directly Of Inchrectly an offer or the solicitation 01 an oller to buy or sell any secunly relerred tOOt mentioned The mailer IS presented merely lor the convenience of the subSCriber White we believe Ihe sources of our mlormatlonto be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herem Any acHon to be taken by the subscnber should be based on hiS own Investigation and Inlormallon Delafield, Harvey, Tabell Inc, as a corporallon and Its officers or employees, may now have, or may later take, POSitions or trades In respect to any secuntles mentIOned In Ihls or any future Issue, and such POSition may be different from an/views now or hereafter epressed m thiS or any other Issue Delafletd, Harvey, Tabe!l Inc, which IS registered With the SEC as an Investment adVisor, may give advIce to ItS Investment adVISOry and othlY cuslomers Independenlly 01 any statements made m thiS or In any other Issue Further mformatlon on any security mentioned herein 15 available on reQuest

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