Tabell’s Market Letter – May 15, 1987

Tabell’s Market Letter – May 15, 1987

Tabell's Market Letter - May 15, 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) 9872300 May 15, 1987 –,.. S hart-term -market-actionl-Bomewhat–lessthan… ex citin g….,overthe..-pas tfew 4 weeks. .ha. non ethel es s .. …,.-\ been' satisfactory The most likely interpretation of the recent trading pattern, in our view, is that it constitutes a consolidation phase—necessary after the rather extraordinary rise of the first three months of the year. A fair amount of reaccumulation has already taken place. sufficient to suggest a move to new highs, although not by a great deal. The most plausible upside objective for the Dow, for example, is around 2425. Obviously, existing base patterns could broaden around current levels and, thus, ultimately suggest more worthwhile objectives. Patterns for the various averages. however. are somewhat less than uniform. The Transports, for instance, have a pattern similar to the Industrials but appear to be well ahead as far as timing is concerned. The DJTA achieved a new closing high of 976.04 yesterday, and it is currently close to most readable objectives. The Utilities, which may be taken as a proxy for interest-sensitive issues, behaved much worse than the Industrials on the recent decline, posting a fall of almost 16. They have since begun what well may be their own reaccumulation phase, but a good deal more broadening will be required before any meaningful move can be expected. There are, essentially. two viewpoints from which to observe the action of any market. These correspond to the axes on conventional charts, the vertical axis of price and the horizontal axis representing time. Thus one way to view the action of the Dow is to note that it advanced 26.88 in 1987 through April 6. Another view notes that this rise required 66 trading days. The most useful aspect of timeframe, however. is not duration, but consistency of action over a given period. It is meaningful to state, in other words. that, between December 31, 1986 and April 6, 1987, there were only nine intervals of a day or longer in which the Dow failed to post a new high, and the longest of these intervals was just eight days long. It is this sort of relentless push to new highs that characterizes dynamic bull markets. just as much as does a sharp percentage advance. Viewed in this framework, one of the most critical facts regarding todays market is that 28 trading days have now elapsed since the last new high was posted on April 6. For almost six weeks, inotherJ..word9-;-t-hereha9x-isted-uncertaint-y-a9-to …whet-her-o-p–not,……on-A-pPil-6-.-the-mark-e-t-rea-ched-a—-I– major high. That uncertainty continues to exist. As far as intervals between new highs are concerned, a few generalizations may perhaps be useful. The initial phase of a given rise generally consists of a dynamic upthrust, during which time the intervals between new highs are short indeed. By contrast, as a bull market becomes more mature, one of two phenomena tends to emerge. The first is a long, intermediate-term correction which, of course, involves a protracted gap between highs. An example is the period between July. 1975 and January, 1976, part of the bull market which started on December 6, 1974, at 577.60, and rose to 1014.79 on September 21, 1976. The gap between the two peaks occupied 120 trading days. The dual highs were at around the 890 level, at which point a good portion of the entire bull-market move had already taken place. The second phenomenon which often occurs in the mature stages of bull markets is the appearance of repetitive periods of modest length separating new highs. Another example can be drawn from the 1974-1976 bull market referred to above. It posted a high of 1009.21 on March 24, 1976. It was 18 days until the next high at 1011.02, 55 days until that high was exceeded, and then another 49 days before the market reached its ultimate zenith at 1014.79. Similar examples may be drawn from previous bull markets. Between November, 1970, and April, 1971, a rise took place which produced no interval of longer than l days without a new high. At the end of this phase, three-quarters of the total bull-market move had already occurred. It is a bit more difficult to place the current year in prospective. All of 1986, or at any rate, the last nine months of it, essentially consisted of a sideways move with wide intervals' between new peaks. Previously. February-March, 1986 saw the Dow move from 1600 to 1821 with the longest interval between new highs being seven days. It is possible, therefore. that March-December, 1986 constituted a corrective phase for that move. It seems probable that. based on historical precedent, that this first emergence of a fairly wide interval between highs is not likely to signify that a top took place on April 6.- …..1t is possible that it does lndicate the start of a slower advancing phase, and may indicate that much of the upward move which began at the end of 1986 may be now behind us. If a top of importance is being sketched out at the moment, a characteristic pattern would be a whole series of minor new highs occurring a significant number of days apart. Such a process would, by nature, require a fairly lengthy amount of time. ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. AWTebh Dow Jones Industrials (1200) 2312.36 S & P 500 (1200) 291.89 Cumulative Index (5114187) 3733.30 No statement or ewpresslon 01 opmlon or any other mailer herem contamed IS or IS to be deemed 10 be directly or mdlrectly, an ol1er or the sohcltatlon of an olfer to buyor sen any secunly referred toor mentioned The matter IS presented merely lor the convenience of thesubscnber While we believe the sources of our mlormatlon tobe reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be talen bylho subSCriber should be based on hiS own Investigation and mformalion Oelalleld, Harvey, labell Inc, as a corporalton and ItS olflcers or employees, may now have, or may later tae, pOSItions or trades In respect to any secuntles mentioned In this or any future Issue, and such position may be dillercnt trom any views nowor herealler e.pressed In Ihls or any other Issue Delafield Harvey labell Inc, which IS registered With the SEC as an mvestment adVisor, may give advice to Its Investment adVISOry and other customers mdependcnlly 01 any statements made In thiS or In any other Issue Further mformatlon on any security mentioned herem IS available on request

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