Viewing Month: February 1989

Tabell’s Market Letter – February 03, 1989

Tabell’s Market Letter – February 03, 1989

Tabell's Market Letter - February 03, 1989
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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 February 3, 1989 – – – – – It,has'beentheworking-hypothesis'ofthis Ietter;–as -the-'-1988'yearend-rally'continued -. – – . through the month Of January, 1989, that what we were seeing was not essentially unlike the rallying phases which characterized 1988. The implication was that the 1989 market could well turn out to be quite similar to its predecessor, a series of up and down swings, perhaps, as had indeed been the case in 1988, showing a slight upward bias. There has emerged some evidence in the past fortnight (although not quite as much as one might expect) that we are currently experiencing something rather different. As of Tuesday, which happened to be the last day of January, the Dow had advanced 14.9 from its November 16 closing low of 2038.58, and the rally had lasted for 51 trading days. Neither was a record. The 1987-1988 year-end rally was 16.1, and the January-April advance lasted longer—57 trading days. What distinguished this particular instance from its predecessors was the persistence of the advance. Consider the fact that there have been, since the October 19, 1987 low, exactly 37 trading days on which the Dow posted a new closing high. Thirteen of those days occurred in January, 1989. This is not an irrelevant statistic. The characteristic pattern of 1988 was the sporadic occurrence of tiny groups of new highs. There were three in January, six in early March, two in mid-March, three in April, four in June, and four in October. The aftermath in each case was that the market rolled over, corrected the bulk of the advance and then moved ahead to another minuscule new peak. By contrast, the entire month of January has been a persistent series of new highs—such highs occurring on 13 of 19 trading days since January 5, with no interval during the month longer than two days in which a new closing peak failed to occur. Amid this exceptional surface strength, it must still be noted that breadth and volume action remain at levels less than spectacular. We called attention to this fact three weeks 1ago.andjheimpr'nremenlsincethaLtime..hasbeennegligible.SinceNovember16,theaver-age daily net difference of advances and declines has been only 116, well below the levels shown on advances in early 1988. In the entire 51-day advance, there has been one trading day with over 1100 advances and two days with rising stocks between 1000 and 1100. Upside volume through Tuesday was just barely over 50 of total volume. a figure not at all atypical of 1988, and one considerably lower than the norm for earlier bull-market rallies. Moreover, while the averages are sailing merrily ahead to repeated new highs, the number of new highs on individual stocks leaves something to be desired. On January 27, 164 new 52-week highs were attained, the best level since the summer of 1987. The number, however, was just over 8 of all issues traded. The usual experience in Ii truly dynamic rally is to see the new-high percentage somewhere well into the double-digit range (over 20 in really powerful markets, like October, 1982). Such levels have not even been approached so far. All this said, the market—as measured by the averages at least—continues to advance. As the advance goes on, the number of upside breakouts by familiar large-capitalization stocks continues to increase, so that it can be argued that the leadership for the advance is impressive. There is, however, a certain circularity to this reasoning. The impressive patterns are found in stocks in the averages, and it is indeed the averages which are moving ahead. The broad-market picture remains less impressive. The overwhelming impression—and here we agree with the hundred or so commentators who publicly shared our feeling this week—is that a large number of institutional money managers are finding themselves embarrassed by excessive amounts of cash. Such money, of course, tends to flow into those stocks which can be bought quickly and which require a minimum of analysis, i.e. blue chips. Thus, the leadership of the current advance. Now one of the sermons we have repeatedly preached in this space over the years involves the unwisdom of fighting the tape, and we intend to heed it ourselves. There is no indication that the supply of institutional cash fueling the rally has dried up. There may be fewer stocks advancing than one would like, but there exists, obviously, a passable number, and a policy of following the blue-chip leadership can result in a portfolio with which one can feel reasonably comfortable regardless of market vicissitudes. At the very least, while it is still possible to hold reservations about the current upswing, the strength of the January rally suggests that time will be needed before anything in the way of major vulnerability develops. Dow Jones Industrials (12 00) S P 500 (1200) Cumulative Index (2/2189) AWTebh 2333.39 297.03 4192.99 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. No statement or expressIOn of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or mdlfeclly, an offer or the solicrtatlon of an offerlo buy or sen any security referred to or mentioned The mat1er IS presented merely for the convenience of the subsCriber While we beheve the sources 01 OUt Information to be reliabte, we m 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 Investigation and Information Delafield, Harvey, Tabell Inc , as a corporation and Its officers or employees, may now have, or may later take, positions or trades m respect to any securities mentioned In this or any luture Issue, and such poS!\IOfl may be different from any views now or hereafter expressed In thiS or any other Issue Oelafleld, Harvey, Tahelllnc, which IS registered Wlththe SEC as an Investment adVisor, 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 securrty mentioned herein IS available on request

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Tabell’s Market Letter – February 10, 1989

Tabell’s Market Letter – February 10, 1989

Tabell's Market Letter - February 10, 1989
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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 February 10, 1989 in Equity maret actin since the crasE!f October. 1987 has had. from a technical point of view. some strangets 77nd- they flaveoeen–notea thisspacelt- is– arguable -urat 7 oas-eCi on–Iundamental;;s…..– also, the market pattern has been somewhat unusual. This is apparent whether one takes a longer-term or shorter-term VIew. Date S & P 500 Earnings PIE Dividend Yield May 29–;1946 19.25 .90 21.4 .68 3.53 Oct 9, 1946 14,12 .89 15.9 .69 4.89 Jun 15, 1948 17.06 1.71 10.0 .85 4,98 Jun 13, 1949 13.55 2.38 5,7 .98 7.23 Jan 5, 1953 26.66 2.40 11.1 1.41 5.29 Sept 14, 1953 22.71 2.51 9.0 1.42 6.25 Aug 2, 1956 49.74 3.60 13.8 1.80 3.62 Oct 22, 1957 38.98 3.47 1l.2 1.76 4.52 Dec 12, 1961 72.64 3,05 23.8 1.96 2.70 Jun 26, 1962 52.32 3.37 15.5 2.04 3.90 Feb 9, 1966 94.06 5,19 18.1 2.72 2,89 Oct 7, 1966 73.20 5.51 1.3 2.89 3.95 Nov 29, 1968 108,37 5.66 19.1 3.03 2.80 May 26, 1970 69.29 5.63 12.3 3.17 4.58 Jan 11, 1973 120,24 6.42 18.8 3.15 2.62 Oct 3, 1974 62.28 9.11 6.8 3.59 5.76 Sept 21, 1976 107.83 9.25 11,7 3.76 3.49 Mar 6, 1978 86.90 10.89 8.0 4.66 5.36 Nov 28, 1980 140.52 14.64 9.6 6.07 4.32 Aug 12, 1982 102.42 14.17 7,2 6.81 6,65 Aug 25, 1987 336.77 14.42 23.4 8.52 2.53 Dec 4, 1987 – – – – – Feb-7988- 223.92 29903 15.86 24.25 14.1 124 8.66 9746 3.87 3;16——-I Some of the longer term aspects are highlighted in the above table. covering 40-plus years of market action. Using the S & P 500, it shows each major bull market high and low together with earnings and dividends for the latest reported trailing 12 months. These figures are used to derive pricelearnings ratios and yields. A rather obvious progression is apparent. Starting on June. 1949. with a pIe ratio of under 6 and a yield of over 7. each successive bull market peak—and likewise each subsequent bear-market low—tended to produce a higher pIe for the 500 and a lower yield. By the 1961 high, the result of this process was a pIe of well over 20 and a yield of under 3. The next decade-and-a-half was a reversal of that process. Each bear market showed a lower pIe and a higher yield. and. finally, the market bottoms of 1974. 1978. and 1982 produced figures not all that different from those of 1949. After 1982. the process that had tRken 12 years to complete in 1949-61 was repeated in five years between 1982 and 1987 with an almost astronomical jump in common stock evaluations. At pre-crash highs, the pIe ratio found itself again at 1961 levels, and the S &; P 500 yield was the lowest in its modern hIstory. The crash. as has been widely pointed out. removed much of the overvaluation. At the post-crash low. the S &; P was sellIng for a relatively modest 14.1 times earnings and yielded 3.87 percent. Action since that time has been particularly interesting smce, While stock prices have risen, they have not increased as much as earnings. and the multiple at Tuesday's high, 12.4 times estimated 1988 results. is lower than the figure at the crash low despite an mtervening 34 advance. This sort of action is fairly unusual since earmngs mUltiples during bull markets tend to expand, accelerating the effect of rising earnings. Once more, the 1946-1949 period provides the only recent instance of similar action. At that time. earnings generally improved (up 167 from the end of 1946 through mid-1949). but the price trend remained flat. Today a 68 earmngs jump has produced a price rise of only half that much. It is difficult to tell what all of this portends for the future. If one wishes to make a , super-bullish case, it is certainly arguable that mUltiples could expand further. An eighteen multiple coupled with a 10 earnings increase could produce an S &; P of 480 (equivalent to Dow 3760). On the other hand. the yield ceiling. at around the 2.8 percent level. is an oft-noted phenomenon and one that has consistently turned back bull markets since the early 1960's. Based on current dividends. the S &; P would start bumping up against this ceiling at only a bIt more than 10 above its present level. Since this IS a technical letter, no attempt has been made to forecast what earnings or diVIdends might be for 1989 and beyond, and indeed, barring a major recession, such a forecast may even be relatively unimportant. As the table suggests, the difficult question of where the market will be willing to value earnings and dividends may be the crucial one for 1989. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC, Dow Jones Industrials (12 00) 2307.50 S p 500 (1200) 295.31 Cumulative Index (2/9/89) 4230.31 No statement Or expreSSion of opinion or any other matter herem contained IS, or IS to be deemed to be, directly or Indlrectty. an offer orthe sohcltatlon of an offer to buy or sen any secUrfty referred to or mentioned The matter IS presented merely for the convenience of the subSCriber While we believe the sources of our InformatIOn to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herem Any acllon to betaken by the subSCriber should be based on hiS own Investigation and mformaMn Delafield. Harvey, Tabellinc. as a corporation and Its officers or employees, may now have, or may later take, positrons or trades In respect to any seCUrities mentioned In thIS or any future ISSue, and such posrtlOn 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 lis Investment adVISOry and other customers mdependently of any statements made m thiS or In any other Issue Further Information on any secunty mentioned herem IS available on request

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Tabell’s Market Letter – February 17, 1989

Tabell’s Market Letter – February 17, 1989

Tabell's Market Letter - February 17, 1989
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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 February 17, 1989 The appearance of the decennial pattern of years ending in eight and the January effect, each historically confirminghigherprices,have come.andgone.-The.-recent rallYrwhichbegan last fall-on '– – . -,November 16, carried into early February, closing at 2347.14 on the Dow Jones Industrial Average, a gain of 15.14 in the time span of 56 trading days Since this recent post-crash high occurred last week, a 65-point correction has stalled the 300-point advance. During this period, the market has been trying to digest from a large menu the many uncertain cross-currents available—the President's Budget Message, prime rate increases, inflation fears. and trade figures, on the one hand, versus a healthy economy, improved 1988 earning reports, and dividend increases in major companies on the other. As readers of this letter are aware, October, 1987 constituted a major cycle low, which by definition, classifies the current position of the market, advancing to date 35, in a bull phase. What has continued to bother us, in the simplest terms, about the recent advance, however, has been the concentration in large-capitalization stocks coupled with poor overall breadth of the market. Recently improved daily market breadth has broken a significant declining trendline albeit well below its March, 1987 high This, together with rotational changes in group leadership, could signal a opportunity for broader participation. With this short-term pause in the advance of the market, we might find some answers by examining the chart below. The NYSE, for Borne 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 middle 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 upper third 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. A classical breadth divergence can be pointed out on the chart above where 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, 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 decline. By hindsight, we also know a breadth divergence occurred prior to the October. 1987 correction; i.e., breadth reached a high in March of 1987 while the DJIA went on to further highs which were not confirmed by breadth. Currently, although breadth action is improving for the short term, the common stock breadth index is still well below its high achieved on March 17 of last year. On the hand, it is interesting to note that the preferred stock breadth index, the interest-sensitive sector, representing a major component of the stock market, has been relatively outperforming the market and is approaching new highs for the same time period. If the market were to again break out of its narrow trading range on the upside, as it continued to do in 1988, improved market breadth would be needed to sustain the advance. However, to date, the leadership continues to be limited to high-capitalized stocks. ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TA BELL INC. Dow Jones Industrials (12 00) 2329.11 S & P 500 (1200) 295.80 Cumulative Index (2/16/89) 4213.64 No statement or expreSSion 01 opInion or any other matter herein contained IS, or IS to be deemed to be, directly or Indlrectty, an offer or the sohcltatlon of an offerto 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 InformatIOn to be rehable, we In no way represent or guarantee the accuracy thereof nor of the statements made herem Any action to be taken by the subSCriber should be based on hiS own Investigation and mformatlon Delafield, Harvey, Tabel! Inc, 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 drfferent from any views now or hereafter expressed m this or any other Issue Delafield, Harvey, label! Inc, which IS registered wrth the SEC as an Investment advisor, may gIVe advice to lis Investment advIsory and other customers Independently of any statements made m this or In any other Issue Further Information on any secunty mentioned herem IS available on request

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Tabell’s Market Letter – February 24, 1989

Tabell’s Market Letter – February 24, 1989

Tabell's Market Letter - February 24, 1989
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TABELL'S MARKET LETTER t 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 February 24, 1989 r One of the background tasks which supports production of this letter each week is the intensive analysis of individual stock-price charts. The amount of information that can be gleaned from such a tIme- – –'–task wIll, periiips-surpMse .those who do riot-regulArly engalWiiiCtt–,clt -inaybe yelpfiJi-.tfhls to- – '-.- undertake a moderately exhaustive analysis of one particular price chart, pointing out its divergences and similarities versus other patterns now extant. J,6lJ 16fJ I IDb 15 o We have chosen for our example IBM, for no reason other than the fact of its 73 billion market value and its 3.7 weight in the Standard & Poor's 500. Un surprisingly , its pattern is not atypical of thE!, ayerage stock. As reaI.es J\Cn9w0J,ir-prelerredbasictoolfor-'.charLanalysis-.i.stheointanddlgul'e chart which, rather than being based on time, tracks each move of a given amount. Since IBM is unusually high-priced, we have chosen to analyze the five-paint-unit chart, in which each box on the chart represents a move of that amount. Let us start by disposing of ancient history. Between 1974 and late 1982, IBM remained in a range (adjusted for splits) between, roughly, 40 and 80, moving above this level in October, 1982 It is an axiom of p and f analysis that such a trading range followed by an upside breakout constitutes a base and that a plausible forecast is for an upside move equal to the width of the base. This is shown by the pattern at A This projection yielded an upside objective of 160 for the stock, and a high of 161 7/8 was reached on April 29, 1986. There ensued a small top pattern (B), and a new base (C), suggesting a new high at 165, a level moderately exceeded at the August 21. 1987 all-time high of 175 7/8. This high turned out to be the center of a top formation at D shortly before the October, 1987 break. In this respect, IBM is typical of the great bulk of stocks in that the 1984 – 1987 market was sufficiently extended to bring them to new, all-time highs. Likewise, the 1987 break was so all-encompassing that no individual stock remained unaffected by it. Most current patterns, therefore. can be compared in terms of their action from 1987 to date. IBM's downside objective was 105, a level it attained on October 19, 1987, tested in December, and approached again in March of last year. Many issues, like IBM, reached readable downside objectives at their 1987 lows. It needs to be noted. however, that charting is an inexact science. and it was arguable at that time (and may even be arguable today) that a broader count should have been taken, suggesting lower objectives. Subsequent action. shown at E. has shown many of the attributes of a base. and the requisite upside breakout from that base occurred on January 31, when IBM reached 130 7/8 and thus posted an upside breakout from the 105 – 125 range which had confined it. The upside target of this base is 215. In this respect also. it is similar to a great many other stocks in that its current price objective suggests new high territory. It should be noted, however, that not all of these issues have, as IBM has done, broken out of their 1987 – 1988 bases. The final point that must be made regarding the IBM pattern is that its base is approximately equal in width to the overhead supply existing from the tops of 1986 and 1987. (Supply, in point-and-figure analysis, arises from prior trading areas which may produce stock for sale.) It is the size of the existing bases versus the supply that constitutes, in our view, the major difference between individual stock patterns today. Quite Obviously, the more attractive issues are those in which the base IS a great deal larger than the supply area. The IBM chart is illustrative of some of the possible configurations which other patterns can assume today. Questions which may be asked about individual issues involve, among others. the extent of the base formed since October, 1987, whether or not the stock has broken out of that base, the size of the base in relation to the overhead supply, whether or not the base counts through that supply, etc. We will attempt to sort out individual patterns according to these criteria in future letters. Dow Jones Industrials 0200) 2257.50 ANTHONY W. TABELL S & P 500 (12 00) 289.83 DELAFIELD HARVEY TABELL Cumulative Index (2/23/89) 4195.79 No slatement or expression of opInion or any other matter herein contained IS or IS to be deemed to be, directly or Indirectly, an offer or the soilcltatlon of an offer to buy or sell any secUrity referred to or mentioned The matter IS presented merely for Ihe convenience of the subscriber While we believe the sources of our Informal1On 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 Informal1On Delafield, Harvey, Tabelilnc , as a corporation and ItS officers or employees, may now have, or may tater 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 e)lpressed In thiS or any other Issue Delafield, HalVey, Tabelilnc, which IS registered With the SEC as an Investment advisor, may give adVice to ItS Investment adVISOry and other customers II'Idependently of any statements made In thiS or 11'1 any other Issue Further Information on any secunty mentioned herell'l IS available on request

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