Tabell’s Market Letter – June 03, 1988

Tabell’s Market Letter – June 03, 1988

Tabell's Market Letter - June 03, 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 June 3, 1988 -Ple, sun whJ-ch.,.J!nallyshone-on theEstern…seaboard.Jast..weeK..–.aimed–a…Jewrayliat….the..market , and Tuesday's 'and Wednesday's trading produced-a 107-poin't Jump in the Dow, The ris';–took' place,' , moreover. on volume which exceeded 200 million shares on both days. Tuesday's tradIng activity achieving the second highest level of 1988. Before allowing joy to become totally unconfined about all this, a few reservations must be noted. We need. first of all, to reiterate our customary warning regarding the measurement of market moves In Dow points. One hundred points, these days, is a bit over 5. non-trivial to be sure, but not of transcendent significance. Volume figures. moreover, are being distorted by that latest plague visIted upon technicians by the gods of the marketplace, the dividend capture. In terms of price. aU that the rise has achIeved. essentially. is the retracement of an earlier decline of an equal amount which simply took a little bit longer. the 15-day drop which brought the average from 2058,36 on May 3 to 1941.48 on May 23, a level which ended the sequence of higher short-term lows which had characterized the market in 1988 so far. Indeed, if encouragement is to be drawn from the market's behavior over the past two weeks, it is probably more appropriate to base it on what the market did not do, rather than on what it did. As suggested above, the low attained on May 23 actually constituted a short-term downside breakout, and, in the most simple-minded sort of chart-reading terms, suggested lower prices. However, short-term breakouts during 1988, both on the upside and the downside, have tended to be false ones. The downSIde break of a fortnight ago.fitted the mold, as the market stabilized and then put on its mini-explosion this week. Before the Dow moved out of new low territory on May 23. a fair number of stocks were flIrting with lows which. if violated. would have produced some fairly ominous downside targets. Thus it IS our feeling that the best thing the rally has achieved so far IS to cause many stocks to pull away from fairly important trading-range lows. Before leaving the subject of breakouts, it is necessary to note that the Dow's ability to move above 1960 this week constituted yet another small-scale upside penetration. At this writing. this – I,…… has ,engender,ed.Jlo.oillorethan.ajy,picall9J!jLlack..of..follow-1hr.ough .with.er.age–pulling–blcl;- from its newly-won heights in Thursday's trading. It is difficult for a technician, in discussing indicator action for recent weeks. not to mention current levels of market sentiment. One of the most widely used measures of sentiment over the past couple of decades, has been the series compIled by Investors Intelligence, which measures the percentage of bullish and bearish market advisors. We poor wretches, it must be blushingly admitted, tend, collectively, to be sadly wrong at major-market turning points, turning bearish at lows and bullish at highs. The latest figures, as of May 27, just before the 107-point rise, saw only 19.8 of all advisors bullish and a whopping 54,9 classifled as bearish, There have been only nine prior periods over the past 25 years during which the number of bulllsh advisors was this low. and the present is only the seventeenth instance of an interval when bearish prognosticators were so prevalent. Again, it is necessary to express reservations. These figures, like senbment indicators in general, tend to be useful as measures of market background rather than tools for precise timing. Although there are few prior instances where bullishness has been as rare, or pessimIsm as common, as is the case today. these intervals have often lasted for months, whereas in the present case there has been but a single weekly observation. Furthermore, while periods of bearIsh sentiment regularly occur around market lows, there are frequently numerous repetitions of such periods. starting, quite often, well before the lows are reached. Thus, their significance tends to be longer term rather than immediate. WIth pessimism abounding. we confess to hearIng a distant siren song—one trying to lure us toward an optimistic stance on the theory that Armageddon seldom arrives widely heralded. We devoted this space a few weeks ago to trying to fathom what might turn out to be the ultimate significance of October, 1987. The universal tendency among market observers has been to assume that this cataclysm, by many measures the steepest drop in recorded history, must assuredly portend something for the future—in .. all … probability something rather unpleasant.,.. We 'have heard nowhere ….— …….—the sort of heresy against conventional wisdom suggesting that the collapse may possess no long-term SIgnificance whatsoever. If this is the case, a market rally, probably one much greater than even today's tiny coterie of bulls expects, might well emerge—and perhaps rather suddenly. We rush to note that the above constitutes only an observation, not a forecast. In the dull market climate of 1988 so far, nothing has emerged. in our view. to push a market observer into an unqualified bearish or bullish stance. For this to happen, there would have to be some manifestation of momentum in one direction or the other. It may be. however, that an interesting market atmosphere is slowly beginning to build. AWT'ebh Dow ,Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (6/2/88) 2058.85 264.51 3746.04 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. No statement or expression of oplnton or any other matter herem contained IS, or IS to be deemed to be, directly or Indirectly, an ofter or the soliCitation of an offer to buy or sell any secUrity referred 10 or mentioned The matter IS presented merely for the convenience of the subscnber While we believe the sources of our Information to be reliable, we In no way represent or guaranlee the accuracy thereof nor of the statements made herein Any acllon to be taken by the subSCriber should be based on hiS own mvestlgallon and If'Iforma\!on Delafield, Harvey, Tabellinc ,as a corporation and ItS officers or employees, may now have or may later take, positions or trades In respect to any securrtles mentioned In thiS or any future Issue, and such pOSition may be different from any views now or hereafter expressed m thiS or any other Issue Delafield, Harvey, Tabellinc , which IS registered With the SEC as an Investment adVisor, may give adVice to Its mvestment adVisory and other customers mdependently of any statements made In thIS or In any other Issue Further miormatlOfl on any securrty menllOned herern IS available on request

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