Tabell’s Market Letter – January 02, 1987

– / TABELL'S MARKET LETTER …. –, I j I I, 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS,INC (609) 987-2300 January 2. 1987 -……- E()rsom-e.-yea rsnGW… we-havtuclie.9.-the-Jamilsonal.,…tendenc…….ofthestockmarketto ,tostage -a year-erfd'rally.'and it has been-the custom of this letter -poi;it out some of the' – conclusions that can be derived from a study of this phenomenon. Since 1897. when the Dow Jones Industrial Average was first computed, a rally, however small. has begun in December and continued into the new year in 87 of 89 cases. the two exceptions occuring in the mid 1970's. The following facts about the year-end rally may be noted. 1. The year-end rally often has been of great magnitude. occasionally continuing through the entire subsequent year without a 5 correction being recorded. This was the case in 1985. It has frequently continued. with only minor interruptions. for as long as six months into the new year. In many cases. with 1986 being the most recent. the rally continued into February, March or beyond. However, on other occasions, it has been of only a few day's duration. reaching a top extremely early as was the case in 1983-4 when the rally peaked on January 6. which turned out to be the high for the year. In the bear-market years of 1960. 1970. 1973. 1974. 1981. and 1982. the rally reached a peak by the first week in January. and. as noted above. the 1976 and 1977 year-end rallies failed entirely to carry into January. 2. There has been a persistent tendency for the rally to begin early in years when the market has been up, and late in years when the market has been down. In recent upward years. 1967. 1975. 1979. 1980. and 1985 are examples. the rally commenced from early December. In recent downward years. 1962. 1966. 1969. 1977. and 1981. the rally began late in the year. 1986 was an exception. an upward year with a late-starting year-end rally. 1– —3.-T-,-he,—,i,,m,p'ortant thing…ghinconnection with..!hel11arket action in the early' montlJ-s J of .lYle new year is the December low;'- This low has -been broken in 51 years out of the past 86. However. in 30 of these 51 cases. it was broken in January and February. For example in 1970. 1973. 1977. 1978. 1981. and 1982. the December low was broken in early January. Since 1937. it has never been broken later than mid-March with three exceptions 1965. 1974. and 1981. when it was finally penetrated in August. Thus. if the market is able to hold above its December low for the first 2 1/2 months of the year. chances become good that this low will not be penetrated. 4. In years when the December low has been broken. the subesequent trend has been downwards two-thirds of the time. 1962. 1966. 1969. 1973. 1974. 1977. and to some degree. 1984. are typical cases. 1965. 1978. 1980. and. most recently. 1982 are exceptions. 5. The magnitude of the rally is an important clue as to the year's market trend. For example. an advance of 10 or more from the December low has been followed by an upward or neutral market in 38 of the 44 years that such an advance has occurred. An advance of less than 10 or more from the December low before an identifiable correction takes place has been followed by a downward market in 30 of the 42 years. Iwboth 1985 and 1986. the year-end rally was well in excess of 10. In 1962. 1970. 1973. and 1977. as examples. it was less than this figure. 6. The length of time in which the rally continues into the new year is important. For example, in 26 years. the rally continued into March or later. In 22 of these 26 years, the eventual trend was upward. In 1964. 1972. 1975. 1976. 1985. and 1986. the year-end rally continued into March and in 1961. 1967. 1971. and 1980. into February. \ This year. therefore. the December low. reached December 31 at 1895.95 will become an important reference point to watch. If the Dow is able to advance from this low by 10. roughly to the 2100 level. or continue a rally into February and March. the long-term historical implications would be bullish. AWTbh Dow Jones Industrials (12 00 p.m.) 1914.37 S & P 500 (1200 p.m.) 244.93 Cumulative Index (12/31/86) 3129.87 ANTHONY W. TAB ELL DELAFIELD. HARVEY. TABELL INC. WE WISH YOU ALL A HAPPY AND PROSPEROUS NEW YEAR! NO statement or epresslon 01 opinion or an other malter herein contained IS or IS 10 be deemed to be directly or indirectly, an ofler or the soliCitation of an offer 10 buy or sell any security referred loor mentioned The matter IS presented merely ferlhe convenience oj thesubscnber While we behevethe sources 01 our Information to be reliable we In no way represent or guarantee the accuracy thereof nor cllhe statements made herein Any aCllon to be \alen bylhe subSCriber should be based on hiS own investigation and information Oata/leld, Harvey, label! 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