Tabell’s Market Letter – March 03, 1989

U'&1B1ED..D..'S 1iUil& IFI IEU' D..1EU'''U'IER 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 March 3, 1989 , T frothy (at )est JyreceI1t, standard) ,o-,,markt. atmqsphere Villic1–chalac1epzedthe beginning of 1989 has entered, at least a temporary respite.—Th-e last post-crash high was scored on February 7. at 2347.14 on the Dow, and, by Wednesday of this week, the average had retreated 100 points from that figure. This was hardly calamitous, since 100 Dow points these days is less than 4 112, but for the technician the pullback is useful in that it provides a frame of reference. November 16, 1988 February 7, 1989 can now probably be defined as the latest of five rallying phases which, along with four intervening declines. have made up the curious market in which we have been immured since the test of the crash lows in December, 1987. If so, the table below becomes the final update of the data set which last appeared in this space some six weeks ago. Date ———– Dec 4 1987 Jan 7 1988 Jan 20 1988 Apr 12 1988 May 23 1988 Jul 5 1988 Aug 23 1988 Dct 21 1988 Nov 16 1988 Feb 7 1989 OJ Average ——- 1766.74 2051. 89 1879.14 2ll0. 08 1941.48 2158.61 1989.33 2183.50 2038.58 2347.14 This Swing ———- 0.00 16.14 -8.42 12.29 -7.99 11.18 -7.84 9.76 -6.64 15.14 C han g e From Hi From Lo 2.84 2.30 1.15 7.49 3.32 2.46 2.48 Number Of Days This Swing Cumulative oa 22 22 9 31 57 88 29 ll7 29 146 35 181 42 223 18 241 56 297 The latest rally was neither the largest nor the longest in the series, the December, 1987January, 1988risehaving,been .greater,.and .the ,JanuaryAprilcadvance 10nger. Itwashowever, – noteworthy in a single respect, its ability to forge into new high ground. Whereas past rises had ' moved only 1 or 2 percent above previous peaks before petering out, this one was able to move a full 7 112 above the October, 1988 high. This sort of move in the averages was clearly due to the large number of top-tier stocks showing action similar to that of IBM, which we analyzed at length last week, noting the stock's breakout from its 1988 trading range and attack on the overhead supply from its 1987 top. When one examines the internals of the most recent advance. a rather mixed picture presents itself. It would be nice to be able to say either that the upswing presented a distinct break with the pattern of 1988, or that it demonstrated a continuation of the deteriorating upside momentum inherent in that pattern. Unfortunately, the truth lies somewhere in between. The average spread between advancing and declining stocks for the 56 days of the advance was 122, notably better than August-October (79), but inferior to December, 1987 -January, 1988 (277) or May-July (172). The same mixed picture emerges when one looks at volume figures. Total volume improved over the levels of last summer and fall, but remained well below early-1988 levels. Upside volume constituted about half the total, just as it had during the other rallies of 1988, and downside volume on the advance remained around one-third of overall trading. There remains in our view, no clear-cut answer to the question of whether the recent upside move by many large-capitalization issues represents the start of a successful assault on the overhead supply or whether a further retreat and reaccumulation will be needed. As suggested above, breadth on the rally was not of the sort that has tended to characterize the start of major upswings. We went back this week and measured the extent of the rise in our breadth index to the highest levels reached in the first 56 days of the last ten major bull markets. This rise ranged from 19.3 points (in October, 1957 to 57 points (in August, 1982). The November, 1988-February, 1989 advance was 14 points. It is hard. therefore. not to conclude that much of the advance was a squeeze on institutional cash positions. confined. as it was, to large-cap issues. And, indeed. even among those issues. IBM. which we chose to highlight as typical just last week, was forced to retreat from its first attack on supply. It must now be considered to be in a neutral trend, one where a break below 114 would suggest a test of its 1988 lows. More bullish evidence may of course emerge and could even have begun to do so with yesterday's strength. Ability to bottom here would make the current correction the smallest one of the bull market. However. as suggested above, the portents remain mixed. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) S & P 500 (12 00) Cumulative Index (312/89) AWTebh 2266.61 289.78 4190.54 No statement or eKpresslon of opinion or any other matter herein contained IS, or IS to be deemed to be, dlrectty or indirectly, an offer orthe soliCitation 01 an offer to buy or sell any secunty relerred to or mentioned The matter IS presented merely for the convenience of the subscnber While we believe the sources of our Information 10 be reliable, we In no way represent Of guarantee the accuracy thereol nor of the statements made herein Any action to be taken by the subscriber should be based on hiS own investigation and Informallon Delafield, Harvey, Tabellinc , as a corporallon and Its officers or employees, may now have, Of may later take, poSitions or trades In respect to any secUrities mentioned In thiS or any future Issue, and such posrtlon may be different from any views nowor 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 Information on any security mentioned herein IS available on request