Tabell’s Market Letter – August 14, 1987

Tabell’s Market Letter – August 14, 1987

Tabell's Market Letter - August 14, 1987
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– .. – …. -, TABELL'S I j MARKET LETTER I I ..,I – – – -. – – . – J f!/akI( fJnc. 600 ALEXANDER ROAD, PRINCETON, NEW JERSEY 08540 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIA TlON OF SECURITIES DEALERS, INC (609) 987-2300 August 14. 1987 The market put on another one of its whiz-bang performances last week, posting gams in excess I -f-f-Ort.y-DQW-'Points-oonda-y-..and.Tues..dayan;LJat..r–thrting with the 2700 level on Thursday before mood to-backingoff- a-obit. – T-he prevailing among those of- us–r-eq-uir-ed comrrCerif on -tllis-'sli1hect. seem eo to be one of astonishment. We did not find ourselves all that astonished by the move, but It was certainly unexpected. We noted just two weeks ago that the Dow had just about reached what we regarded as plausible near-term objectives in the low 2500's. There were also possible objectives, which We regarded as less plausible, around the 2600 level. These price targets were left in the dust by the week1s spectacular advancea The rally was called, in many quarters, a record-setting one, especially by those who, ignormg common sense and theIr Sixth-grade arithmetic class, still insist on measuring advances in terms of pointsa In this instance, though, the correct measurement of the rally. in terms of percentages, still yielded results that had seldom, in the past. been equalled. Monday's and Tuesday's advances were each approximately 1.69 and, by themselves, were hardly uniquea Lookmg at longer periods, however. the four tradmg days ended yesterday. for example, shows that 3a84 advance to be somewhat unusual. There have, since 1946, been only 69 cases where the market has moved ahead this much over a four-day perioda Interestingly, this sort of strength has tended to occur for the most part after major market bottoms. The emergence of such dynamics in a market which has been going up for 37 months appears to be far less common a Measuring the rise from May 20, when the Dow closed at 2215a87 after the only recognizable correction of the year, gives us an advance of 21.49 over 59 trading days. Measuring from the end of 1986. shows a 156-day advance of over 40. This was exceeded in only in May 1975. July 1975. March 1983, and April 1986. All of these instances, interestingly, occurred around the mid-point of major advances. and a general truism regarding sharp advances over periods of six to eight months is that they almost never suggest lower prices over the near term. SurprIsmg 8S the current strength may be, it is best to regard it as suggesting a relatively high level of demand rather than market overextension. '-I–'–0n –Ilut a f-ew-Occa-sions-of-late..-we41av-e-foun-G-ou-r-selQs gQin g 9 sked wbe n w.e….1.houghtthe……b.1WJill1 '—l-I market had started. Others, apparently. are being asked the same question, since last week there appeared a host of opinions regarding the exact date of the bull's birthday. The most popular dates appear to be July 25. 1984. August 12. 1982. and finally December 6. 1974. whlch saw the Dow at 577.60. To many of our readers, such controversy may be equivalent to medieval scholastic arguments about the number of angels which can dance on the head of a pin. However, to those of us who believe the market exhibits some degree of periodicity, all this is more than Idle speculation a The three dates mentioned above are all plausible depending on just what bull market we are talking about. In our view we find ourselves at this time in at least three separate bull market cycles—a super-cycle, or secular, bull market that may well have begun in 1974, although it is generally measured from 1982, a cycle bull market which, at this point, probably should be dated from July, 1984 snd finally a rIsing phase within that cycle bull market WhICh we prefer to regard as having started on the first day of 1987. There are problems with this interpretation. It requires, first of all, calling 1982-1984 a completed cycle only 23 months in length. As readers are aware, such cycles have generally required in excess of four years to complete. Still another problem is that we Seem to be in the third maJor advancmg phase that has taken place since 1982. Such a three-phase advance makes the market of the 1980's look uncomfortably like the one of the 1920's. We first noted this similarity a year and a half ago, and we find ourselves, at the moment, being uncomfortable with the number of people now discovering the similarity we mentioned at that time. Regarding the 1920's vs. the 1980's, we think two points need to be made. The first is that we have so far come nowhere near duplicting the 1921-1929 advance in the current instance. In order to do so, the Dow. as we noted 18 months ago. would have to rise to between 4000 and SOOOa The second and most Important factor, however, is the fact that 1929-1932 was totally unexpected. Even the few voices crying in the wilderness in the late twentles did not forsee anything like the magnitude of the decline which eventually ensued. A repetition thereof -is hardly likely at a time when half the world seems to be looking at the 1920's with some degeree of trepidation. We have stated in the past that, human nature not having changed, we do not think something approaching the importance of the 1930's depression should be though impossible. We have also stated our belief that, if such a phenomenon were to occur, it would take an entirely different shape than that of 1929-1932, a shape that would make it unrecognizable until too late. We feel, moreover, that, while the preconditions for such a phenomenon might emerge some time in the future, they cannot be said to be present given the widespread scepticism of 1987. ANTHONY W. TABELL DELAFIELD. HARVEY. TABELL INC. AWT ebh Dow Jones Industrials (1200) 2703.13 S P 500 (1200) 333.98 Cumulallve Index (8/13/87) 4097.17 No statemClnt or erpresslon of opinion or any otller matter Ilereln contained IS or IS to be deemed to be, dlrectty or Indirectly an offer or tile soliCltalion of an offer to buy or set I any security referred to or mentioned Tile matter IS presented merety for the corwenlel1ce of tile subscriber Willie we believe the sources olour information to bereflilbte we In no way represent or guarantee tile accuracy thereot nor 01 the statements made herem Any acllon to be taken by the subscnher should be based on hrs own Investrgatlon and rnformatron Delalreld, Hatvey, Tabell Inc, as a corporillion and ItS officers or employees, may now have or may later take, positions or trades In respect 10 any secufliles mentIOned In tillS or any future Issue, and such pOSition may be different Irom any views nowor heleafler expressed In tillS or any other Issue Delafield Harvey Tabell tnc which IS registered WI til tile SEC as an Investment adVisor, may give adVice to lIS Investment adVISOry and Olhe' customers Independently of any statements made In thiS or In any other Issue Furtller Information On any security mentioned herem IS available on request

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