Tabell’s Market Letter – February 27, 1987

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 February 27. 1987 — — …. –Readers who-are expectingithis -week,-a-precise forecast,of the.a.oirection .ofthe mBrket–'-Breduly. . -;;;;. warned at this point that they may toss thIS sheet into the nearest waste basket. Rather than providing answers. we intend to raise some questions — in line with the ancient adage about the right questions being necessary to obtain the right answers. We intend. moreover, once again to explore a ' …,.,. .., ,.. '.. ——,-,.-. .'''''……. -,—..'..-..-'-.-.-being the question which, current location START DATE DJIA JUN 1896 JAN 1901 NOV 1903 NOV 1907 OCT 1911 MAR 1915 DEC 1917 AUO 1921 JUl 1923 NOO 1929 JUl 1932 SEe 19J APR 1938 APR 192 NOO 1946 JUN 199 SEP 1953 DEC 1957 JUN 1962 OCT 1966 AY 1970 DEC 197 AR 1978 30.22 8. 91 32.17 12.79 55.52 60.83 74.38 67.11 86.91 238.95 54.26 92.63 111.28 95.35 169.89 167.2 264.04 35.69 561.28 807.07 700.H 616.24 757.36 regUlar readers know, has ofter been raised in this space, that of the Dow in terms of the familiar four-year-cycle pattern. HIOH DATE DJIA x LOW HIGH lOW DATE TOTAL DJIA OS OS '00 AODS, X AD, X OF OF DEC -PR-E-V—LO-W- PREV HIGH 'PR 1899 54.90 JAN 1901 18.94 62 -II JU' 1901 57.10 NOV 1903 32.47 5 15 -OJ JAN 1906 73.76 NOV 1907 12.79 54 NOO 1909 70.3 OCT 1911 55.52 24 -21 DEC 1912 64.37 MAR 1915 60.83 41 -6 NOV 1916 105.97 DEC 1917 7. 38 JJ 20 61 74 -30 OCT 1919 118.92 AUG 1921 67.t 1 H 22 so 60 -H 1923 102.75 JUL 1923 86.91 2J OJ 53 -15 SEe 1929 343.45 NOV 1929 238.95 76 74 ,OS -30 APR FE, 1930 1931 279.23 103.46 JUL 1932 SEe 1934 54.26 92.63 32 26 5 1937 186.11 AFR 1938 111.28 4J 30 17 -81 -10 10. -0 NOV 1938 119.82 1912 95.35 7 15 -36 JUN 1946 205.62 '00 1946 169.89 55 50 116 -17 JUN 1918 189.46 JUN 199 167.12 31 61 12 JAN 1913 289.77 SEe 1953 264.0 51 B4 73 JUL 1957 508.52 OEC 1957 435.69 51 93 DEC 1961 731.11 JUN 1962 561.28 6B -2J JAN 1966 983.51 OCT 1966 807.07 43 BJ -IB DEC 1968 943.75 AY 1970 700.14 43 60 17 -26 JAN 1973 999.02 DEC 1971 616.21 55 58 43 -3' 5EP 1976 990.t 9 1978 757.36 J9 21 61 APR 1981 997.75 JUl 1982 808.60 37 71 -19 IJ2 13. II. 90 13. 2J S6 17' 15' 165 B7 BB 123 .6 95 92 S6 m 81 37 lB. eo '37 92 153 I7S 135 .06 10. question AVERAGE – JUNE 1896-KAR 1978 15 29 61 72 -27 127 125 AVERAGE – NOVEKBER 1946-KARCH 1978 17 35 72 55 -20 131 l25 AVERAGE – OCTOBER 1966-KARCH 1978 46 26 57 10 -29 106 100 11II The tabulation above is a familiar one and shooJ!r ownin.terpretation9Utle-,-fouryearcycle since the DJIA was first computed in 1896. The cycle is measured from low to low, and for each successive wave the start, the high, and the low are given. using month-end closes. The remaining columns are self-explanatory and show the length of each cycle in months and the percentage amplitude of the advancing and declining phases. The first obvious comment is that the table has not been added to since its current form became obvious in late 198'2. It is obvious that a new upward cycle began in the summer of that year so that the only thing for certain we know about the next line is that its starting point will be July, 1982 with the DJIA at 808.60. The simpliest assumption. of course, is that that cycle which began in 1982 continues today. This interpretation. unfortunately, has by now become so implausable that it probably should be discarded as a possibility. It would stretch the advancing phase so far to 178 and make a high at 224 of the previous (1981) high. It would. in addition. stretch the cycle's length to fifty-four months without a declining phase even having begun. Furthermore, our readers are aware of our attitude that 1987's strength so far presages further strength. Thus such a phase is unlikely at any time in the immediate future. A way out of the dilemma is to call the downswing between November, 1983 and July. 1984 the termination of the last cycle. This cycle would then have a length of 24 months, of which 16, or 67. would have been advancing ones. The advance would measure to 58 and the declining phase to 13. The advancing phase of the next cycle. running from July 1984 to date would now be 31 months long. involving a 101 advance. The twenty-four month length would make the tenative 1982-84 cycle one of the shortest on record. That short cycle would. unfortunately. be comparable to the August, 1921-July, 1923 experience which. it will be noted, was followed by the longest cycle in the table which ran from July. 1923 through November. 1929. One could perform a further cycle breakdown by hypothesizing that the trading range of the last nine months of 1986 constituted a full-scale correction. This would yield a cycle of normal length. with the present upswing just in its infancy. We are. however, close enough to last years action to recall it vividly. and identIfying it as a major correction stretches credibility. One could perform the same exercise by calling the thirteen months from February, 1926 to March, 1927. which have much the same configuration as last year. a major correction. This we have chosen not to do. We have. in other words. achieved a paradoxical situation in which further strength is the likely expectation, but an excess of such strength is likely to increase the market's cyclical vulnerability. We expect, therefore, to be raising the question of the cycle environment again in future issues. AWTmjs Dow Jones Industrials (1200) S & P 500 (1200) Cumulative Index (2/26/87) 2228.06 2R4.31 3655.94 ANTHONY W. TAB ELL DELAFIELD. HARVEY. TAB ELL INC. NO statement or expression ot opinion or any other matter herein contained IS or IS to be deemed to be directly or Inchrectly an offer or the solrcltaUoll of an offer to buy or sell any secuflty referred to or mentioned The matter IS presented merely for the convenience of the subSCriber While we believe the sources of our Information to be refrable, wern 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 rnvestlgatlon and Information Delafield, Harvey, Tabeff tnc, as a corporahon and ItS officers or employees. may now have or may later take, pOSitrons or trades In respect to any securities mentioned In thiS or any fulure Issue, and such pOSition may be olfferent from any views now 01 hereafter e…pressed III thiS or any other Issue Delafield, Harvey Tabeff Inc, which IS registered With the SECas an Investment advlsol, may give adVice tOI\S Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further Inlormatlon on any security mentioned herein Is available on request