Tabell’s Market Letter – November 20, 1987

TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987 -2300 November 20, 1987 Long-time readers of this letter will be aware of our penchant for quoting the famous paragraph alludes-tothe'–fromtne SherlocKHormes story. Sliver -Blaze.lnwhich thegreatdetect1ve- curious ——- incident of the dog in the night time. The background for this is that a valuable horse has been stolen from a stable. Watson points out that the stable dog did nothing in the night time, and Holmes rejoins, that was the curious incident. Holmes has deduced from the dog's not barking that the culprit was one known to him. Unlike most ordinary mortals, Holmes has been able to glean useful information from the failure of an event to occur. We are fond of this quotation for reasons that go far beyond our own infatuation with the Holmes stories. There are many instances in the task of market analysis where it is necessary to observe what is not happening as well as what is happening. The present may be just such a case. The September – October collapse in equity prices bottomed, we all remember, at 1738.74 on October 19. Within two days it had regained almost 300 points to 2027.85. That has been the high so far. At today's close, 24 trading days since October 19 will have elapsed. We are entitled to ask whether or not this behavior is consistent with the hypothesis that October 19 will turn out to have been the actual low of the downswing. It is necessary to state, unfortunately, that such is not the case. The table below summarizes market behavior following fifteen dates which we know, by hindsight, to have been major stock-market lows. It includes the actual low dates of all downswings since 1929 which, in our opinion, can plausibly be identified as major cycle bottoms. The table summarizes action for the 100 trading days following each of these lows. For each 10-day bracket, it lists the number of days on which a new high was made either in the Dow Jones Industrials or in our breadth index. (The two indices are taken together, since it is a characteristic of many bottoms that breadth outperforms the Dow in the early stages.) For 1987, only the two days noted above qualify for inclusion in the table. Twenty-two trading days have elapsed since then without a new high in either indicator being posted and, absent the sudden emergence of a rather strong advance, it appears unlikely that such a high will occur during the near future. – ..-…..,. Date 1-10 11-20 21-30 31-40 41-50 51-60 61-70 71-80 81-90 91-100 Nov 13, 1929 7 5 5 51 4 4 Jul 8, 1932 8 10 8 4 71 Mar 31, 1938 6 2 1 37 4 5 Apr 28, 1942 9 2 5 5 222 7 Oct 9. 1946 5 1 3 31 28 Jun 13, 1949 7 8 7 6 3 31 6 4 Sep 14, 1953 8 5 8 7 1 4 1 2 10 6 Oct 22, 1957 4 4 2 7 51 2 Jun 26. 1962 8 1 2 6 1 4 Oct 7, 1966 7 7 4 1 10 7 5 May 26, 1970 6 1 21 42 6 4 Dec 6, 1974 7 6 5 7 745 52 Feb 28, 1978 9 4 3 8 353 Aug 12, 1982 10 5 5 3 831 1 Jul 24, 1984 9 3 4 3 22 Oct 19, 1987 2 No subsequent high through day 24 The table shows that, in contrast to the two lonely new highs posted SUbsequent to October 19, most previous lows saw new highs being scored on a majority of the first ten days of the subsequent advance. Five has been the lowest number of advances in the first 20 days, and the average number of new highs for the fourteen 20-day spans has been eleven. In the first 30 days of past bull markets, an average of fourteen new highs have occurred with the smallest number being six. Interestingly, 1929 and 1962, the two markets with which this one has most frequently been compared, saw initial lows followed by just two days of reversal, as is the case for the October 19 low so far. The October 29. 1929 low of 230.07 was followed nine days later by the ultimate low at 198.69. The low of May 28, 1962, at 576.93, was the precursor of the June 26 low at 535.76, There is, we suppose, some solace to be gained from the fact that 24 days have now elapsed without the present market's moving to a new low but this phenomenon would, we think have to go on for some time before it could be termed significant. There is. paradoxically, a bullish note implicit in all of the above. The new lows cited above all turned out to be major ones. It is quite possible that the same will be able to be said of any new low which might be chalked up over the near term. Such an occurrence, however, following the five-week surcease of the September – October battering might produce a difficult period in which to practice investment dlscipline. ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. AWTebh Dow Jones Industrials 0200) 1902.02 S & P 500 0200) 238.15 Cumulative Index (11/19/87) 3028.86 No statement or expression of opinion Of any other matter herein contained IS, or IS to be deemed to be, directly or indirectly, an offer or the sollcrtatlon of an offer to buy or sell any security referred to or mentioned The matter IS presented merely for the convenience of the subSCriber While we beheve the sources of our InformatJon to be rehable, we In no way represent or guaramee the accuracy thereof nor of the statements made herern Any action 10 be laken by the subscriber should be based on hiS own investigation and Information Delafield, Harvey, Tabellinc ,as a corporation and Its officers or employees, may now have, or may later take, poSllions or trades In respect to any seCUritres menlloned In thrs or any future Issue, and such pOSll!on may be different Irom any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabelilnc , which IS registered With the SEC as an Investment adVISor, may give adVIce to lis Investment adVISory and other customers Independently of any statements made In thiS or In any other Issue Funher Informa\lon on any security men\loned herem IS avaIlable on request