Viewing Month: March 1987

Tabell’s Market Letter – March 06, 1987

Tabell’s Market Letter – March 06, 1987

Tabell's Market Letter - March 06, 1987
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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 March 6. 1987 — – A …t-heim8jor -m8rket-averagescontinu-e-toscore'newhighs .. ,wer.e,choasing., once gl!into – focus on' afewof- the less-than-positive aspectsof- the current stock market -scene. We do this, not to suggest pessimism. but rather as a exercise in the sort of discipline that one should practice during an obvious bull market. In such an environment. there is little point in looking at those momentum indicators which simply underscore the probability of continued strength over the intermediate term. lnstead, eVen at this early stage, it is preferable to concentrate on those areas which. if they do not improve. might indicate relatively serious deterioration. Basically, despite the new highs in conventional daily and weekly breadth indices. there exist a few indicators which suggest that the current rise is not quite as broad as it should be. One such indicator is extracted from the data on new highs and new lows. The Dow, 8S of yesterday's close, was some 375 points, or 20 percent, above the level at which it had finished 1986. It was almost 300 points above the best level posted at any time during last year. Yet. for all of the strength, the best the market has been able to do in terms of individual stocks reaching new highs was 258 such highs on Feburary 18. This is. to say the least. a rather pitiful showing. , The differential between new highs and new lows generally rises sharply during the early stage of any bull market. Such was certainly the case in late 1982. when one day saw more than 600 new highs posted and when. in October. the ten-day moving average of the high-low differential moved to over 300. Similar strength was shown following the July. 1984 low with the ten-day differential moving above the 200 level in January-February. 1985. The peak for this series was scored early last year, wlth a ten-day average differential of 310. During last year's trading range, the high-low figures deteriorated and even, on a few occassions, reached negative territory. The ten-day figure moved up, of course, in early 1987, but the best level it has been able to reach this year was a peak of 152 in early January. and clIltasnotDnbe1o-PostJDW hignhsgince'7- We noted above that conventional breadth indicators have confirmed the market's current rise. There is, however, one such indicator that has failed to do so. That is breadth based on advance-decline figures for common stocks only. One has to approach this particular data set with some caution. Theoretically, the common-stock figures should provide the most accurate breadth indication. They have, however, not been available long enough to confirm this theory by observation. Indeed. based on the limited information available, the common-stock breadth index has not behaved all that differently from the all-inclusive one. In the current case, however. common-stock breadth has failed to confirm the high posted back in 1983 and. indeed. remains below its peak of early 1986. On this basis. at least, the present breadth divergence is indeed massive. Suspicion that market leadership is disturbingly narrow is confirmed by a look at the action of NYSE common stocks on an individual basis. We studied the action of 1277 such issues as of Wedensdayts close. and the results are of some interest. For example despite the Dow's strength. only 642. or slightly more than one-half of the issues studied. posted new highs during 1987. 635 Issues, in other words. at their best prices of 1987, remain below peaks scored in 1986. Obviously a fair number of issues which posted their highs last year are, at recent prices, very close to exceeding that high. This. however, is not generally true. Issues which posted their peak in 1986 have. on average. recovered 45 of the loss scored following that peak. Since there has long existed a technical rule of thumb stating that a recovery of one third to one half of any loss is normal in an ongoing downtrend, the implications of the average recovery are somewhat less than postive. It must be admitted, of course. that all of the negative figures above could indeed Change with further market strength. New highs could post the kind of rise shown in 1983 and 1986, and it would not take much further strength for common-stock breadth to attnew high ground. Also, many of the- issues that recovered only'modestly from last year's peaks currently possess- continuation bases suggesting that those peaks could be exceeded at some time in the very near future. Nonetheless. the indicators noted above should be watched closely to determine whether or not improvement takes place. If better indications do not emerge and some of the many currently-postive indicators begin to deteriorate, a weaker market could emerge as a distinct possiblit y. AWTbh Dow Jones Industrials 0200) S & P 500 (12 00) Cumulative Index (3/5/87) 2278.26 289.30 3709.94 ANTHONY W. TABELL DELAFIELD. HARVEY. TABELL INC. No statement or expreSSIOn ot oplmon or any other matter herein contained IS, or IS 10 be deemed to be directly or Indirectly, an ofter or the soliCitation of an offer to buy or sell any secuflly reterted 1001 mentioned lhe matter IS presented merely tor the convenience of the sUbscliber While we belJeve the sources 01 our information to be rehable, we In no way represent or guarantee the accuracy thereof nor of the statements made herelf\ Any achon to be taken by the subscriber should be based on hiS own Investigation and information Delaftetd, Harvey, labeU Inc, as a corporahon and lIs ofhcers or employees, may now have or may later take, POSitions or trades In respeclto any seCUrities menlloned In thiS or any future Issue, and such POSition may be dlf!erent Irom any views now or herealler epressed In this or any other Issue Delafield Harvey, label! Inc which IS registered With the SEC as an Investment adVisor, may give advice to ItS Inyestment adVISOry and other customers Independently of any statemenls 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 – March 13, 1987

Tabell’s Market Letter – March 13, 1987

Tabell's Market Letter - March 13, 1987
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c- '1T(IHEn.IL.' S RrEV I1.rEVVrER – 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 March 13. 1987 An interesting and fairly rare market event occurred this week as Inco and Owens-Illinois were —repUlCed in…theDowJones-Industrial-A verage -by- Boeinw….8ndGoca- Oolae- eventis-r-are- because Dows-Jones tends to treat new additions as a process roughly equivalent -to conferringsainthood, ,- something that should occur infrequently and only after due deliberation. On the occasion of the Dow's 100th birthday some three years ago, we took the occasion to pOint out that 6 of the 30 issues had relatively small market capitalization. Two of these departed yesterday. At that time, we also suggested the inclusion of McDonald's which subsequently took place As far as the latest changes are concerned. we find ourselves in agreement with the addition of Coca-Cola. We are less certain of the advisibility of adding Boeing to an average which already includes United Technologies. We would have preferred a technological company outside the aerospace area such as Hewlett Packard or Digital Equipment. The hlstory of the Dow, mirroring, as it does, the changing composition of the U.8. economy is, to us, an interesting subject. The first average of any sort started in July. 1884, and 1896 saw the emergence of the first purely industrial average, this sector, at the time, being considered junior to the blue-chip rail industry. T his first Industrial Average consisted of twelve stocks and. during its existence. contained such entities as Distilling and Cattle Feeding. Standard Rope and Twine, and Pacific Mail Steamship. It is hard to tie it into today's Industrials, since there were only twelve stocks, some preferred issues were included, and stock prices, until 1916. were quoted, like bonds. as a percentage of par. It was the termination of this practice that led to the creation on October, 4, 1916. of a new 20-lndustrial Average, which can be considered the forerunner of the current Dow. Various changes were made over the next dozen years, and. on October 1. 1928. the twenty industrials beca.me thirty. with ten new stocks added, and six SUbstitutions being made. Of these original twenty stocks. there is only one that today remains in the average with the same name and roughly the same business. That company is General Electric, also included in the original 1896 average. Two other original componenents remain but with changed names and, to a 1I..d-eg changej busiesse—U .8. Steel, nUSX Corporation. and American Can, now a financial services company, shortly to be renamed Primeriea. Six other present components arrived on the scene between 1916 and 1928. In 1924 the average became less than strictly industrial with the additions of and Woolworth. Allied-Signal (Allied Chemical). General Motors, Navistar (International Harvester) and Texaco (Texas Company) came on board in 1925. The expansion of the average to 30 issues in 1928 brought in four current components, Bethlehem Steel. Exxon (Standard Oil of New Jersey) Union Carbide. and Westinghouse were added at that time. The remaining 17 slots in the average have had various occupants in the years from 1928 to date. This week's addition of Coca-Cola. interestingly, provides the second entrance of that stock into the Dow, where it also found a home between May, 1932 and November, 1935. There exists a fair number of cases in which a company as left the average only to return once more. The case most frequently cited is IBM. which entered the average in 1932, was dropped in 1939 to make room for American Telephone-and returned in ,June, 1979. Various attempts have been made to calculate the astronomical heights to which the Dow could have risen during the 40 years of its absence. An accurate estimate would be difficult to come by. and we do not intend to try. In additon to IBM and Coca-Cola, five of today's components have been in, out, and again in the average. In all, 45 companies. besides the current 30 components, have spent time in the average. five of them on two separate occasions. It is our own thought. voiced here three years ago, that a few more changes should be made. It is possible that Dow Jones may be more willing to make future changes, having made seven in the past eight years. This followed a long period during which the components of the average remained largely unchanged. The 17 years from 1939 to 1956 saw no change whatsoever in the group, and only four changes occurred between 1956 and 1979. These were. the 1956 substitution of International lSaper for Loew's. the 1959 swap of Nahonal Steel and National Distillers for and wens-Illinois, and finally -the .1976 replacement of Anaconda by … MinnesotaMining … .. -In closing, it is interesting to speculate what problems may force future changes. The continued inclusion of low-priced Bethlehem Steel and Navistar seems to be inappropriate. (Both stocks could double. and the average would only rise a bit over 14 points.) In addition, the change in character of American Can and the recent addition of American Express gives the Industrials two components in the financial-services category. Most other average-makers have created a separate Financial Average to go witl-t Industrials, Transportation, and Utilities. Dow Jones, in 1970, changed the Railroad Average to a more comprehensive Transportation measure. The creation of a Dow Jones Financial Average seems to us. at least. appropriate. ANTHONY W. TAB ELL DELAFIELD. HARVEY, TABELL INC. AWTbh Cumulative Index (3/12187) Dow Jones Industrials (1200 p.m.) S & P 500 (1200 p.m.) 3740.77 2264.34 290.98 No statement or efpreSS!On of opinIon or any other mailer herein contl!ned IS, or IS to be deemed to be dnecHy Or mdlrectly. an oller or the sohc!tatlon of an offer to buyor sell any SeCunly relerred 1001 mentioned The matter IS prescntd merely for the convenIence of the subscflber WhIle we behevethe sourcesot our mformatlon 10 be reliable. we m no way represent or guaranleethe accuracy thereot nor 01 the statements made herem Any actlOnto be taken by the subscnber Should be based on hiS own uwestlgatlon and InformatIon DelafIeld, Harvey, Tabetl Inc, as a corporatIon and ItS officers or employees, may now have or may latc! take. POSItIons or trades m respect to any secuntles mentIoned m thIS or any tuture Issue. and such pOSItion may be dillerent from any vIews now or hereafter eJpressed In this Of any other Issue Delafield, Harvey, Tabell Inc. whIch 15 regIstered wl1h the SECas an mvestment adVIsor, may gIve advIce to Its Investment adVISOry and other customers mdependenHy of any statements made mthls or In any other Issue Further mformatlon on any security mentIoned herem IS avaIlable on reQuest

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Tabell’s Market Letter – March 20, 1987

Tabell’s Market Letter – March 20, 1987

Tabell's Market Letter - March 20, 1987
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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 March 20. 1987 The sharp rally which has been the feature of 1987's first quarter. carryIng through to an intraday peak of over 2300 on the Dow thIS week. was, when It erupted in January, a somewhat -5 u rp risin g – phenomenon—-H owev er.' as -we haY e attem p ted –to–POl nt-ou hin t his-s pace. -)t–\… as- not— '—I uncharacteristic of'recent rruuket action. As 1986 ended, we had seen two earlier-upside explosJOns emerge out of the blue, the fir'St in August, 1982 and the second in July, 1984. January. 1987 has turned out to be the third such case, and it is relevant. therefore. to measure 1987 market actIon so far against those two previous benchmarks. This we attempt to do in the chart below which depicts the first 100 trading days of the two previous rallies along with the first 54 (through yesterday) tradmg days in the current market. In order to facilItate the comparison, the 1982 and 1984 series have been adjusted so that their starting level IS equivalent to 1895.95. the figure at which the average closed 1986. Below the Dow chart, the action of our daily breadth index in the three periods is depicted on a sImilar basis. BASE FIJG 12 1982 (-0-) DOW JONES INDUSTRIAL AVERAGE BASE JULy 198ij1–) BASE DEC 31 1986(-) The most ObVIOUS generalizatIOn regarding the current market is that it falls just about halfway between 1982 and 1984 in terms of both breadth and percentage advance. The two previous cases began with sharp upside explosions and then flattened. whereas early 1987 produced a slow and steady rise in the Dow. so that. by mid-February. it had advanced, on a comparative basis. even more than in 1982. What dIfferentIates 1982 from the two subsequent cases is the sharp second legll , which started m October of that year. This. as the chart shows, took the indicator to the equivalent of 2600 before It fmally flattened and began moving sideways. It is the lateral move in the second half of theIr lifespan which makes the two previous advances relevant from a forecasting point of view. If past experIence is followed, the Dow could remain in a trading range centered around current levels at least until late May. We can expect, therefore, a dimunition of action on the upside but, based on past experience, there should occur little in the way of a significant correction. While the action between now and the beginning of the summer may be uneXCIting. It must be noted that, before the two previous upswings had run their course, they had each moved the Dow up around 65. versus the 20 move so far. If thIS precedent is followed, the current upswing could carry well over the 3000 level some tIme in the first half of 1988. AWTbh Cumulative Index (3/19/87) 3762.41 Dow Jones Industrials (12 00 p.m.)2314.63 S & P 500 (I200 p.m.) 296.31 ANTHONY W. TABELL DELAFIELD. HARVEY. TABELL INC. NO stalemmll or expression of Opinion or any other matter herein contained IS Of IS to be deemed 10 be directly Of Indlrectty an offer or the soliCitation of an offer to buyor sell any security referred to or menuoned The malj(IIS presented merely lor the convenience of the subscriber While we betlevethe sources of our Informallon to be retlable we In no way represent or guarantee the accuracy thereof nor of the Statements made herein Any action to be taken bv the subscnber shoutd be based on hiS own Investlgallon and information Delafield Harvey, TabeH tnc, as a corporation and Its officers or employees may now have, or may later tae POSitiOnS or trades In respect to any securrtles mentioned In thiS or any future Issue and such pOSitIOn may be dillerent from any views now or hereafter epressed In thiS Of any other Issue Delafield, Harvey Tabell Inc which IS registered With the SECas an Investment adVisor, may give advlcelo lIs Investment adVISOry and other customers Independently 01 any statements made In Ihls or In any other Issue Further information on any secunty menlloned herem IS avallable on reQuest

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Tabell’s Market Letter – March 27, 1987

Tabell’s Market Letter – March 27, 1987

Tabell's Market Letter - March 27, 1987
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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 March 27, 1987 The late Harold X. Schreder was, to our knowledge, the originator of the thesis that the 1—1ky -to-un d ers-tandin g -the-stock mark etlies .in,..th e .Jecognitiontha tI!!okis a!!,oin g -\ ob-ject. This is a formulation which is simple, yet profound. In a single sentenc-e, it -' -. justifies the use of technical analysis as an adjunct to the conventional fundamental approach. Fundamental analysis, it becomes apparent upon reflection, is largely concerned with levels. It is necessary only to consider the terms in which such analysis is usually couched—cheap or dear, overpriced or underpriced, etc. The technical approach, on the other hand, finds itself more concerned with trend or direction. Such an approach likens the action of the stock market to that of an airplane, recognizing the fact that it is less important to know a plane's altitude than whether it is climbing or diving. Columbus discovered the new world not by precise navigational tools, but simply by sailing west. This distinction is particularly relevant to today's stock market. As this letter has been pointing out ever since the process started, the extraordinary upside momentum generated by the rise of the past three months is characteristic of the take-off stage of a major upswing. By and large, bull-market tops do not occur On increasing upside momentum, but on the waning of that momentum. Consideration of the market's direction leaves the analyst no choice but to pronounce the outlook, for as far ahead as we can see, as calling for higher prices. It must be noted, however, that consideration of the market's current level leads to a point-of-view somewhat less optimistic. The S & P 500 closed on Thursday at 300.93. This figure is 20.2 times the approximate 14.82 earnings that average produced in 1986. The dividend for the 500 was about 8.35 which affords a yield of only 2.77 percent. Modern history has seen the S & P PIE ratio above 20 on only a few occassions. The first 1—I—-aon4e6wadsembientewe-,ennt Oc fie tober S ,P;19T38JjeanndexFt eobcrcuurarreync1r9w3n9-saaroouunndd-tt1hieeltloip1lo1'fkaet'bsu-lpleam'ka-r;kne-ttha-ned'pSruemcmeedri-nog,f-,-I–I 1946, and the final case lasted over a year between April, 1961 and April, 1962, precisely at the time the market was topping prior to the 1962 bear market. Likewise yields of less than 2.8 have, in the past, tended to precede market tops. The return of the S & P fell below this level in November-December, 1961, November, 1968, and between April, 1972 and February, 1973. What are we to make of these two contrasting outlooks' The first lesson, we think, is to avoid excuses. The writer's father, another old-time observer, was fond of remarking that stock prices, while partially dependent on earnings and dividends, are also dependent on a third factor—investor confidence. A product of such confidence is a tendency to rationalize, often quite creatively. It is now suggested, for example, that the S & P 500 is worth 20 times earnings because the Japanese stock market is even higher. A common excuse, which had prevailed up until recently, was that rising bond prices were bullish for stocks, and those whom the wire services call at the end of the day were able to explain just about every advance in the average using this explanation. It is heard less now that the S & P provides a yield approximately half that of T-Bills. Since we are technicians, we prefer to keep the level of stock prices in mind as a background factor and rely on the technical pattern as our guide to the intermediate-term outlook. This approach has historical justification. In 1961-2, the S & P PIE ratio remained above 20 for over a year, and the index advanced over 13 from the first occurrence. In addition, higher PIEs (although not as high as the present one) have often been reduced by earnings improvement. The 500 was at 19.6 times earnings in early 1959, but a subsequent earnings rise lowered that valuation. A t the moment our readers know. we assess the technical outlook as highly bullish. However. we intend continuously to remind ourselves of the rather rich prices being paid for present earnings and dividends. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. AWTbh Dow Jones Industrials (1200 pm) 2369.46 S & P 500 C12 00 pm) 300.11 Cumulative Index (3/26/87) 3816.04 No statement or expreSSion 01 opInion or any other matter herein contained IS or IS to be deemed to be directly Of Inchrectly an offer or Ihe sohcllallon of an otler 10 buy or sen any secl.Jflly referred toor mentioned The malle'ls presented merely lor the convenience 01 the subSCriber Whlfe we beheve the sources of our information 10 be reliable, we In no way represent or guarantee the aCcuracy thereof nor of the statements made herein Any aCllon 10 be laen by the subSCriber should be based on hfs own 1Twestlgallon and Inlormallon Delaflefd Harvey, Taben Inc as a corporal Ion and lis offiCers or employees, may now have, or may laler take, pOSitions or trad(!s In respect 10 any securities menlloned In thiS or any future Issue, and such position may be dltferent Irom any VI(!WS nowor heJeafler (!Kpressed In tl1ls or any other Issue Delafield, Harvey, Tabell Inc which IS registered with the SECas an Investment adVisor, may give adVice lOlls mVestmenl adVISOry and other customers Independ(!nlly of any slatemenlS made In thiS or In any other Issue Further Information on any secuflty men\loned herem IS available on request

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