Tabell’s Market Letter – June 26, 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 June 26, 1987 ..- ….. – r- -'— – — – — — It was L … M. Lowry. we believe. who first made the pronouncement. liThe market is always lowst at the low. It has always been one of our favorite quotes. Seemingly trite and obvious at first, it becomes. on a few moment's reflection, a reasonably profound truth. Bear markets. after all, consist of a series of new lows each one bringing further erosion of portfolio value. After a while, these lows become more frequent and, essentially, indistinguishable from one another. Yet one of them will prove. well after the fact, to have been the major low. the best buying opportunity of the entire cycle. The same principle in reverse applies to bull markets, which are, by definition, a repetitive series of new highs. This observation is prompted by the fact that the Dow posted a new closing peak yesterday at 2451.05. the 38th occasion of a new high's being recorded since the bull market began on January 2. It is possible. of course, that this was the market high. Whether or not this was the case, however, we have one of the rare opportunities afforded the analyst to make a pronouncement with total certainty. We can assert that. as of June 25. 1987. a major bull market remained in effect. How useful is this information If bull markets had a record of turning on a dime and beginning precipitous plunges, it would have little or no value. Such, however, is not the case. Most bear markets do not begin the accelerated phase of their decline until well after the actual high is made, and they often begin it from a point very close to the high. In other words, that high is often tested quite some time later. This can be documented by the table below. which shows the high date for the last 11 cycle bull markets. It then shows the last date following the bull market high on which the Dow traded within 2. 5, 7. and 10 of its peak. The figures in parentheses are the number of trading days between the high and the date shown. BULL MARKET RIGR LAS T D ATE W I T H I N A G I V E N OF HI G H 2 5 '1 10' May 29, 1946 Jun 15. 1948 Jan 5, 1953 Apr 6, 1956 Dec 13. 1961 Feb 9, 1966 Dec 3, 1968 Jan 11. 1973 Sep 21, 1976 Apr 27. 1981 Nov 29, 1983 Jun 17, 1946 (12) Nov 1. 1948 (101) Mar 25, 1953 (55) Jul 26, 1957 (328) Mar 19. 1962 (65) Feb 17, 1966 (6) May 16. 1969 (109) Jan 12. 1973 (1) Jan 3. 1977 (71) Jun 23. 1981 (40) Jan 19, 1984 (35) Aug 15, 1946 Nov 4. 1948 Apr 2. 1953 Aug 9. 1957 Apr 6. 1962 Apr 26. 1966 May 29. 1969 Jan 26. 1973 Mar 17. 1977 Jun 30. 1981 Jan 27. 1984 (54) Aug 23, 1946 (60) (103) Feb 3, 1949 (172) (66) Aug 18. 1953 (158) (338) Sep 3, 1957 (354) (79) Apr 25, 1962 (91) (52) May 2, 1966 (56) (128) Jun 9. 1969 (124) (10) Oct 29. 1973 (201) (123) Apr 18. 1977 (144) (45) Aug 6, 1981 (71) (41) Feb 2, 1984 (45) Aug 2'6, 1946 (61) May 19, 1949 (264) Sep 9, 1953 (173) Sep 19. 1957 (366) May 8, 1962 (100) Jun 24. 1966 (94) Jun 18. 1969 (131) Nov 1. 1973 (204) Jul 25, 1977 (211) Aug 20, 1981 (81) May 10, 1984 (113) The figures show that in, seven of the eleven bear markets. the Dow returned to within 2 of its high over periods ranging from two to fourteen months. In ten cases, it had returned to within 5 of that high over a similar period. and, in all cases shown. a recovery to within 7 of the bull market high ultimately took place. We have, of course, been commenting here on some of the negative aspects of market action including poor breadth, few new highs, and insipid volume. All of these phenomena, however, tend to lead highs in the averages by many months. In addition. the table suggests that. even after a hlgh is reached, a serious decline does not usually set in until much later. This affords the analyst time to observe market action before actually making the suggestion that a given bull market is probably over. ANTHONY W. TAB ELL DELAFIELD, HARVEY. TAB ELL INC. AWTebh Dow Jones Industrials (1200) 2443.88 S & P 500 (1200) 307.82 Cumulative Index (6/25/87) 3844.60 No statement or expresSion 01 opinion 01 any other mailer herein contained IS, or ls 10 be deemed 10 be, dlfeClly or mdlrectly an oller or the solicitation of an offer to buy or sell any security relerred loor m()nllOned The matter IS presented merely for the convenience of the subscriber While we believe the sources of our Information to be reliable we In no way represent arguarantee the accuracy thereof nor ellhe statements made herein Any sctlon \0 be taken by the subscriber should be based on hiS own Investigation and information Detafletd, Harvey, Tabell Inc, as a corporation and lis officers Of employees, may now have, or may later tae, positions or Irades In respect to any securities mentioned In thiS or any luture Issue and such POSition may be different Irom any views now or hereafter e)(pressed In thiS or any other Issue Delafield Harvey Tabe!l Inc which IS registered With the SEC as an Investment adVisor, may give advice to ItS Investment adVISOry and other customers Independently of any sfatemenls made In thiS or In any other Issue Further information on any secunty mentioned herem IS available on reQuest