Tabell’s Market Letter – August 21, 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 August 21, 1987 1— —- or.,the-flft.ythlrdmthisy.er.–t1I-.'O1es …lpgQstrialyerl!g-seJ.wx-9-d'htgJL c1osingThurs-day at 2706.79. This was achieved in spite of 8 45.91 point correction on Tuesday the- seventh largest one-day point declIne in the industrial average. In terms of percentage decline. this 1.70 correction registered was, of course, not historically as significant. Within this framework, the recent performance of the Financial stocks and Utilities stocks has greatly improved, posting impressive gains within recent weeks, suggesting that interest rates may be on their way down and inflation fears temporarily arrested. CUMULRT I vE nSE CGHO'I 5iOC.r fjPEQDTH nmfll CUMULRTIVE NSE PPEFEpo;ED ')TOcr, EPEq!lTH IJOE( The potential significance of this recent strength in the interest-sensitive sector of the stock market can be shown by examining a traditional technical tool—market breadth—in a slightly different manner. The NYSE, for some sixty years, has recorded the advances. declines. and unchanged of all issues traded. More recently. breadth figures have become available for common stocks only. This new series constructed as a breadth index (advances – declines divided by total issues traded) is shown in the upper third of the chart above. As expected. this common stock index behaves in a similar manner to that of the traditional total issues breadth index. By subtracting common stock issues from total issues traded, we are also able to develop a preferred stock breadth index representing over one quarter of the total issues traded. This interest-sensitive index is shown above in the middle of the chart. Both of these breadth indexes are compared to the DJIA in the lower third of the chart from the August, 1982 low to date. It is interesting to point out that the common stock breadth index spent most of the second half of 1983 declining, while the DJIA went on to new highs in October, 1983. This divergence was followed by a correction of 15.39 in the DJIA lasting until July 1984. The preferred stock breadth index during this period, however, went to a new high, reflecting the ongoing strength in the interest-sensitive sector during the general market declme. From the July. 1984 low to date. the DJIA has advanced without major interruption, 149.11. However. as this letter has pointed out in recent weeks. there contmues to exist a divergence in the breadth of the marketme8surement8 partially a8'a-result of the poor relative performance-of the interest-sensitive sector during the second quarter of this year, and partially due to the narrow, selective quality of the leadership. Currently. both breadth indexes discussed above are improving, but they have not posted new highs above their preVIOUS March, 1987 high. Also, the daily raw advance-decline lme has not yet posted new highs WhICh would confirm the ongoing bull market, but it is improving. A move through -these levels would negate the potenbal negative divergence. Representing 8 major component of the stock market. the interest-sensibve sector of the market. usmg this unique breadth index 8S a proxy, should monitor the contmued improvement in the sector in order to determine if market breadth is signaling a change from the narrow, selective leadershIp of the advance, to a more broad-based partIcipation. ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY TABELL RJSebh Dow Jones Industrials (1200) S & P 500 (1200) Cumulative Index (8120187) 2710.78 336.02 4105.38 No slalemenl or a.preSSlon 01 OPinion or any other mailer herein conlalned IS or IS to be deemed to be, directly or indirectly, an oller or Ihe solicitation 01 an offer to buy or sel! any security referred toor mentioned lhe malter IS presented merely lor the convenience of the subSCriber While we believe Ihe sources of our Information 10 be rellabte, we In no way represent or guarantee the accuracy thereof nor 01 the slatements made herein Any action to be taken by Ihe subSCriber Should be based on hiS own Inestlgatlon and Information Oelahetd, Harvey, label! InC as a corporation and ItS ofllcers or employees may now have, or may laler take, POSitions or trades In respecllo any securilies mentioned In thiS or any future Issue, and such POSition may be dltferent from any views nowor he'eatler expressed In Ihls or anv olher Issue Delaheld Harvey labell Inc, which IS registered With the SEC as an Investment adVisor may give adVice to ItS Investment adVISOry and 01he' cUSlomers Independently 01 any slatements made In Ihls 01 In any other ISSue Furlher Informallon on any security mentioned herem IS available on reQuesl