Viewing Month: January 1988

Tabell’s Market Letter – January 08, 1988

Tabell’s Market Letter – January 08, 1988

Tabell's Market Letter - January 08, 1988
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,——————————————————————————————————————– 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 January 8, 1988 Point-8nd-figur c..b.!lring .J)8\!.ingb.een, in our-..case. a .1amUyaffair. we .incurred-,,-our first exposure to the interpretation- of such charts when we were still in high school. If we had looked at a chart of today's market at that time, we have no doubt that we would have identified last week's action as 8 breakout from a fairly important base formation with an upside objective somewhere around 2600. It is often wise in technical analysis, to adhere to the acronym, KISS (Keep It Simple. Stupid). We are, therefore, probably better off by not vexing ourselves with complicated reservations regarding the above opinion. Such reservations would be stimulated by the strange pattern currently to be seen in market breadth indices They would include the fact that a significant number of individual stocks have, at the moment, no base pattern at all. They would also involve questions regarding the long-term pattern which would be formed by a rally falling short, as the projected one might, of attaining new highs. Let us, for the moment at least, content ourselves with the simple scenario that we find ourselves in a market whose short-to-intermediate-term direction is up. This having been said, it is worthwhile, we think. to focus on one particular aspect of recent market behavior That aspect is the sharp rise in market volatility. This phenomenon, it should be emphaSized, is not restricted to the period centered on October 19. High volatility has been a feature of all of 1987, and it has continued to manifest itself right up through this week. Our readers know that we have used as a volatility measure the standard deviation about their mean of daily log changes in the DJ1A within market months. We will not bore our non-mathematical readers by explaining this figure once again and ask that it be taken on trust that the statistic is an accurate measure of volatility. We have previously noted that October, 1987, produced an alltim e record J orthis particular-numbe,comfortably exceed in g-N ov ember.-1-929W-hn t-is——I significant, we think. is that above -average volatility continued in both November and December. This is the first time we have put together a string of three such months since 1938. Thus, in terms of the extent of daily swings, recent market behavior appears to be much like that of the 1930's, and may even resemble the early part of that decade when above-average swings characterized every month between May, 1931 and November, 1933. It can be demonstrated in many ways that current market vacillations are of an entirely different breed than those many of us are used to. If we use June 1949, the start of the last super-cycle bull market, as a starting point and look at the ensuing 38 112 years through the end of 1987, we arrive at some rather interesting numbers for daily market swings. Let us take, for example, the 100 largest daily declines, in percentage terms of course, occurring during that 38 1/2 year period. The last three months of 1987 constitute only 0.65 of the period under study, but 16 of the 100 largest declines took place in those three months. Indeed, of the 11 largest daily drops, seven occurred during 1987's final quarter. It can be argued, moreover. that this is really acceleration of an ongoing phenomenon. Nineteen of the 100 largest declines took place in the year 1987, and 37 took place in the 1980's. Nineteen Seventy-four, it will be recalled also had a number of large declines, and if we include that year along with the 1980's, we have, in 9 years, 56 of the 100 largest drops Since, we are stUdying volatility, not trend, however, we should be equally concerned with advances. Over the same 38 1/2 year period, ten of the 100 largest rises took place in October-December, 1987, and eighteen occurred during the year as a whole. Following the practice above, we find that 68 of the largest 100 advances since 1949 occurred either in the 1980s or in 1974. It seems axiomatic, then, that volatility has increased sharply over that observed in the 1950's, 1960's, and 1970's. However, as we have noted above, if one goes back to the 1930's, there is no dearth of similarities to the tumultuous market behavior being observed today. It is our feeling, that, until evidence to the contrary appears, investors should expect a continuance of the wide market swings of the past three months. How this prognosis is to be translated to portfolio strategy must be determined by the individual investor. AWTebh Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (1/7/88) 201376 257.02 3312.86 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. No statement or eKpreSSlon or opinIOn or any other matter herein contained IS, or IS 10 be deemed to be, dlreclly or Indlreclly, an oHer orthe soIlcltalron of an offer to buy or sell any security referred \ to or mentIOned The matter IS presented merely for the convemence of the subSCriber While we beheve the sources of our Information to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subscnber should be based on hiS own investigation and Information Delafield, Harvey, Tabelllnc, as a corporation and lis officers or employees, may now have, or may later take, posrtlons or trades In respect 10 any secuTitles menlroned In thiS or any future ISsue, and such posllion may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabellinc , which IS registered With the SEC as an Investment adVisor, may give adVice to tts Investment adVISOry and other customers Independently of any statements made In thiS Of In any other Issue Further Informallon on any secUTIty mentioned heretn IS available on request

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Tabell’s Market Letter – January 15, 1988

Tabell’s Market Letter – January 15, 1988

Tabell's Market Letter - January 15, 1988
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– – — – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – – ——————-7———————————————————————————————— TABELL'S MARKET LETTER 600 ALEXANDER ROAD, eN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 January 15. 1988 A funny thing happened on the way to 2600. We noted in last week's letter that a naive readmg of the point-and-figure chart for tne Dow, without considering other factors. suggested a possible move to the 2600 area. -T-Dur,,letter goesJo….pess.Jltnoon each Friday. Whereupon, the market spent last Friday afternoon falling out of bed and wound up down some 140 points. Subsequent action through this week. whIle featUring wide, mtra-day sWings. has been inconclusIVe. We do not. honestly. feel all that embarrassed about last week's pIece. Indeed. under the stImulus of the improved trade defIcit, it may still prove vahd. However, we thmk toe important part of tne letter was its second half, which focused on what we believe to be the market's major current attribute msofar as Investment management is concerned. That attribute, of course, IS volatility. Our concern regardlOg the recent emergence of this factor is apparently widely shared, notably by tne New York Stock Exchange, which announced today an experimental six-day program involving reductIon of automated trades. A few years ago. tristit'uti'onal lnvestor magazine emblazoned on it'3 cover the phrase. This isn't a bear market. This 18 the way things are go1Og to be from now on. 1I If this is true in respect to . .volatihty. mvestors had best be aware of it. , 10 5'ING5 IN OJlo 1929-1938 ..li – 'Ie .–'—- . … . .. . . . . ….,. . . . . – . H' ' 200 'IUHgt OF ORfS '50 The chart above IS a scatter diagram covering each 10-or-greater swing in toe Dow since October, 1929, a total of 138 market moves. Each mark represents one move, eitner up or down, of 10 or morp. witn toe percentage change of that move bemg read from the vertical aXIS, and the number of days for the swing along the horIzontal axis. Let us first conSIder the moves identified by a plus SIgn. These 55 SWings took place between February. 1947 and August, 1987. It is easy to observe what appears to be a distinct relationship between the extent of a given move and tne number of days reqUIred to complete It. ThIS relationship can be summaT'ized by the regression lme drawn on the chart and, although there is wide variation, the fIt is reasonably close. Of the 55 moves during that period. 36 lasted more than 100 trading days. By contrast, the moves marked with a asterisk are those whicn took place between 1929 and 1946. A more chaotIc distributIon would be hard to imagine. These 1929-46 moves. moreover.- are concentrated on the left hand 'ide of the chart showing that tne duratIon tended to be quite short. Indeed. 19 of the 55 swings were less than 10 days 10 length. Finally. moves marked by a zero show the six 10-or-greater swings SInce last summer's hIgh. It appears obvious tnat they are rignt at nome with the swings of the 1930's. Market reform may return us to the era when important market moves were measured in months and years rather than days and hours. Until thIS occurs, though. continued volatIlity should probably be expected and will have to be dealt WIth. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. AWT'ebh Dow Jones Industrials (1200) S P 500 (12'00) CumulatIve Index 0/14/88) 1966.01 252.23 31Rq 73 No statement or expression 01 Opinion or any other maner herem contaIned IS, or IS to be deemedto be, directly or Indirectly, an offer orthe solicltallon of an offer to buy or sell any secunty referred to or mentIOned The matter IS presented merely for the convenience of the subSCriber While we believe Ihe sources of our mlormatlon to be rehable, we ,n no way represent or guarantee the accuracy thereof nor 01 the statements made herein Any action to be taken by the subSCriber should be based on his own Investlgallon and mformallon Delafield, Harvey, Tabe!! Inc, as a corporation and I\S officers or employees, may now have, or may later take, positions or trades In respect to any secuntles mentioned In thiS or any luture Issue and such position may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabelllnc , whlch!s registered wl1h Ihe SEC as an mvestment adVisor, may give adVice 10 liS Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further in/ormation on any secUfity mentioned herein IS available on request

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Tabell’s Market Letter – January 22, 1988

Tabell’s Market Letter – January 22, 1988

Tabell's Market Letter - January 22, 1988
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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 (6091987-2300 January 22, 1988 A.1thougil this letter, over the course of 42 years. has devoted itself largely to technical -'!- analysis, we -have never marle–th-e claim.. that-.technicRl-work-po.c;sesses ….aUtne .,answers. Wehay e. ather, leaned toward a more modest affirmation, WhICh. simply, states that sHch 8nalysb shouJd constitute an integral part of the investment-decIsion-making process. At the moment, it must be confessed, technical indications remain somewhat inconclusive. It now becomes apparent that tile upside breakouts by many averages some two weeks ago. were ralse. and Rlmost all market indices have pulled back into trading ranges and currently find themselves somewhCIe between their October 19 lows and recent highs. We think there ic;; d reason for this, and it involves making the diHtinction between market-related and external phenomena. Future prospects in a number of areas external to the market seem, at tnis point, to be uncp.rtain, and it may well be that this is causing the volatile backing and filling which has been the centra) feature of trading for the last three months. The necessity for distinguishing between the two sorts of phenomena emerged, in our oplnJon, with comparison of the current market scene to that of the 1920's, a comparison, which hac;;, naturally, occupied a fair amount of space in recent editions of this piece. We have made the point that we considered the drop from 3RL17 in September, 1929 to 198.69 m November to be 8 product of factors internal to the market itself. We now know. all too well. that the villain was a wave of rampant speculation fueled by the presence of ridiculously low margin requirements. The illusion that the stock market was a royal road to the riches, had, we tnink. been dlssipateil by November, 1929, once the Dow had been trimmed by some 4B percent. Following that November low, the market staged a reasonably impressive rally whicn lasted some six months and regained approximately half the ground lost. ' –Arpr';iIlt;-wr9a3s0 at this point that factors totally outside the stock market began -It is now apparent, economic contraction on an unprecedented to take over. By scale was undEfrway. time went on. It became equally obvious that the tools then available to cope with a major depression were inadequate for tile task. As Indeed. we now realize in the light of history that, in many areas, the proper action would have been the direct opposite of the course actually taken. Attempts to balance the budget were made at a time when, it is agreed. fiscal policy should have provided a stimulus. Congress responded to a growing trade deficit by raising tariff barriers sharply, and finally, by 1931, tne Fed had allowed the money supply to drop some 30 percent. Given these wrong-headed policies, depression became inevitable. and falling stock market prices between 1930 and 1932 did nothing more than reflect that depression. Like the one in 1929, tne market break between August and October of last year was, in our opinion, a market-related phenomenon. Speculative fever was as high as it had been 58 years before. except that this speculatIon was being carried on by supposed professionals rather than individuals. Due to the introduction of rl.erivative products. large amounts of stock could be controlled by small amounts of money and, as the market broke, trade deficits were featured on the front pages of the financial press. By October 19, however, the market's internal problems, as in 1q29 – 1930. had, in our OpiJlion, been largely resolved, however painful the process. What remains to be seen is whether or not external depressants on the scale of toe 1930's will emerge. A number of outside factors remain. we think, uncertain. Opinions differ, for example, as to whether the ovember trade figures signify a deciSIve reversal, or only a random blip in a continuing downtrend. The problem of third-world debt, obviously. remains. although tne recent proposal witil respect to the Mexican component thereof may be a blueprint for the best possible solution. The levels for other sorts of debt, are, moreover, just as disturbing. Leverage created by acquisitions and buyouts, for example, has not yet become a terribly onerous burden for creditors. but it could, ultimately, do so. Tne worries enumerated above, legitimate ones, in our View, are what now overhang tne market and cause the current confusing patterns of technical behavior. Ultimately. present economic fears will eitiler dissipate or prove to be Justified. The market's technical action should, at some point. foresnudow one of these two outcomes. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELf, AWTebh Dow Jones Industrials 0200) 1886.77 S & P 500 0200) 244.57 Cumulative Index (1/20/88) 3208.66 No statement or epresslon of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or indirectly, an offer orthe soliCitation of an offer to buy or sell any security referred to or mentioned The matter IS presented merely for the convemence of the subSCriber While we believe Ihe sources of our information to be reliable, we In no way represent or guarantee the aCCuracy thereof nOf of the statements made herein Any action to be taken by the subscriber should be based on hiS own Investigation and InformallOn Delafield, Harvey, Tabelllnc, as a corporation and Its officers or employees, may now have, or may later take, positions or trades In respect to any seCUrities mentioned In thiS or any future Issue, and such position may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabelllnc, 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 Further Informa\lon on any securtty menlloned herem IS available on request

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Tabell’s Market Letter – January 29, 1988

Tabell’s Market Letter – January 29, 1988

Tabell's Market Letter - January 29, 1988
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TABELLS 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 16091987-2300 January 29. 1988 We indicated n this space last week that much of the uncertainty in the current market outlook could be traced back to uncertain fundamentals. That uncertainty. in turn, may be due to tne fact that ihterprelatioof-fundamental data Loften- seems to be -moreJof an …arL.lhan ascience. Consider for example. the fonowing recent news items. , . . .. – – – ''''! Item It was announced on Wednesday that Gross National Product grew at 8'4.2 annual rate in the fourth quarter. one of the best increases in a number of years. Item On tne preVIOUS day. it was reported that durable goods orders i1ad risen 6.7 in December. the largest rise In more than a year. Item A week ago. four major computer companies reported Sharply increased earnings for the latest quat'ter. Hem, On tne previous day. the leader in that same industry. IBM, weighed in with a 50 rise in net income. — Let us now conSIder tne market's response to the aforementioned information. The sharp rise in GNP produced a stock market which, under the influence of program trading, dropped almost 10 points. Higher durable-goods orders were followed by a 26-point drop in the Dow. Of the major computer companies, , whose earnings almost doubled, dropped three points. Microsoft reported earnings up 79 and fell 3 1/4 points, Onisys. showing a profit versus a loss last year. dropped 1 5/8 points, as did Motorola, whose earnings had posted a 62 gain. With these issues posting downSide leadership. the DJIA dropped 57 points. Finally. the sharply-improved IBM earnings caused the stock itself to fall 6 points. While leading the Dow to a 27-point decline. — Now, we are perfectly willing to agree tilat tile proposition that rising earnings or improved economic statistics should always be followed by stock-price rises is a fairly simple-minded one. Indeed, aU sorts of sophisticated rationales were cited for the stock-market results that seemed so perverse. Thus we learned that the GNP rise was based largely on inventory build-up and that the unexpected durable goods demand was largely due to aircraft bookings. Which tend to be erratic. Analysts were quoted as saying that the 62 earnings rise in Motorola was less than expected. and therefore. prompted disapPOinted selling. According to the Wall Street Journal. however. Apple's eariiings iitcrease excee-drdth-emostoptimisticexpectations,- yet-failed—toe-ep …thestockprice–from-''I plummeting. In the same vein, the Journal quoted analysts as saying Microsoft results were – -. fabulous and absolutely awesome. The stock's reaction could hardly be so described. Finally, it was explained that lBM's earnings rise was largely due to lower taxes and should. therefore, be discounted. Along with upside-down reactIons to what seems to be good news, the market also appears to be becolning confused as to just what sort of external statistics it should be responding. We remember being instructed last year that a better bond market was the sine qua non for a rising stock market. Equities peaked on August 25 last year following a bond market high in July. at which a representative O.S. Treasury issue. the 8 3/4's of 2003-08. sold over par. The low for these bonds on October 16 was under 86. thus, apparently confirming the correlation between the bond market and the stock market. What remains unexplained. however. is the fact that the bond is again above 100. with the stock market, for three months, having done nothjng whatsoever. There have been numerous days during the last quarter when bond and stock prices moved in opposite directions, something that would have seemed inconceivable in the first six months of 1987. It may well be that the bond market's usefulness as a stock-market barometer is coming to an end, as was the case with the money-supply barometer, which had everyone bemused a couple of years ago. Remember the money supply We waited with bated breath for the figures to be released each Thursday afternoon. Increases regularly brought the stock market to its knees, on the theory that Mr. Volcker. then the resident ogre at the Fed would attempt to counteract the rise by tightening monetary strings, thus, in some magic way, causing the stock market to fall. Declines in the money supply regularly produced stock market rises. Such, however, does not appear to be the recent case. Most monetary aggregates have. lately, been plummeting without any noticable upward effect on stock prices. It was Lord Keynes who likened the stock market to a peculiar form of beauty contest in which the object of the exercise was not to pick the most attractive girl, but to guess which lady the other judges would choose as most attractive. Such seems to be the case at the moment. with stock investors apparently unsure as to what numbers they should now be paying attention. There is, really. nothing unusual about this sort of confusion. The central tenet of the technician has always been that investor confidence is an important criterion for determining stock prices. It is hardly surprising that confidence should be in a state of shock following the action of last October. Technical work will, we hope. give us some clue as to when that confidence is returning and making stock buyers likely to respond more favorably to improved fundamentals. AWTebh Dow Jones Industrials (1200) S & P 500 (1200) Cumulative Index (1/28/88) 1934.84 254.28 3300.60 ANTHONY W. TABELL DELAFIELD, HARVEY. TABELL INC. No statement or ressIOfl of opinion or any other matter herein contained IS or IS to be deemed to be, directly Or IOdlrectly, an offer orthe solJcatJon of an offerlo buy orseiJ any security referred (0 or mentroned accuracy thereof e matter nor of the IS presented merely for the convenience of the subscnber While we beheve the sources of statements made herein Any action to be taken by the subscnber should be based on hiS our mformal1On to own Investigation baendrerlinafbolreawtleoInn no way represent Delafield Harvey oTrbeurarraInncteeatshea poraton and Its oHlcers or employees, may now have, or may later take, poSitions or trades In respect to any securities mentIOned In thiS or any future ISSU8 nd such' pOsIOn may be , erenl 10m any VIews now or hereafter BXPfBSSed In thrs Or anyotner Issue Dela111!\d, Harvey, Tabelf Inc, which IS registered wh the SEC as an Investmentalsor may give adVice to Its Investment adVISOry and other customers mdependently of any statements made In thiS or In any other Issue Further Information on any secunty mentioned herein I available on request

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