Viewing Month: May 1989

Tabell’s Market Letter – May 05, 1989

Tabell’s Market Letter – May 05, 1989

Tabell's Market Letter - May 05, 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 May 5, 1989 In a week generally characterized by dullness, with pullbacks from last week's highs.in the widely- follow,nildlca toneminor -bnght spot weilt IatgeljrunnOtici;dand-may , therefore, I)-e worthy of comment. On Monday, the Dow Jones Utility Average closed at 192.80 and extended this gain slightly (above 193) on Tuesday morning before pulling back. This marked the first time that the average had traded at the 192 level subsequent to its downward plunge through that price in October, 1987. This has produced the chart pattern below on a 2-point-unit curt of the &D c9 &10 QOO II 190 1'0 1/0 ,-.. I(Q – . .- II 150 The posting at 192 can, Obviously, be read as an upside breakout, with the most conservative upside target, resulting from a reading at B-C, of 226 which, of course, would be a test of the 1987 high. A reading of the entire base at A-C would produce a truly startling price target of 256. Now at this point, the first of a whole series of caveats must be introduced, this one relating to the massive overhead supply starting at around the 200 level. As we have noted here, many issues have already tested their comparable supply and have encountered a great deal of resistance. We would expect the utilities to experience equal difficulty. Individual stock patterns, of course, vary. A fair number of gas utilities have already broken out of their base formations, while most electric utilities have not, and those individual companies beset by nuclear problems generally have no bases at all. However, a typical current example might be Public Service Enterprise Group, now around 24, which has held, since the crash, between 20 and 26. A breakout from this range could suggest a possible 35 followed by higher levels. It may well be asked why we are discussing a laggard average at a time when the Transportation Index has posted a newall-time high and other major indices continue in cycle bull markets. The reason is the possibility that the utility indicator may be telling us something about interest rates. The current dividend for the Dow utilities is just over 15, producing a yield of 7.81 at current levels. Were the first objective of 226 to be reached, that yield would become 6.64 and, at the second objective, 256, the yield would be 5.86. At 35, PSEG would yield 5.83 versus its current 8.24. These calculations assume no change in dividends. but, allowing for modest increases. we are looking at the possibility of utility commons producing 6-7 yields in the next couple of years. Attempting to project a plausible relationship between these levels and other money rates, a yield for AA Utility Bonds might be 1.2 to 1.3 times the utility-common yield. This could mean a rate for these issues of 7 1/4-9 versus the current 9.87. Long governments returning around the 7 range would be consistent with such a structure. Given current conventional thinking at least, such yields ought to be highly bullish for stocks. This is. of course, not totally certain, since such rates. were they to come under the stimulus of extended recession, would hardly be encouraging for eqUities. Nonetheless, the action of utility stocks as potential harbingers of interest-rate changes could be an important factor in today's markets. ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL INC. Dow Jones Industrials 02 00) 2402.49 S & P 500 (1200) 309.86 Cumulative Index (5/4/89) 4402.17 AWTcg No statement or expression of Opinion or any other matler herein contamed IS, or IS to be deemed to be, directly or Indirectly, an offer crthe soitCltatlon of an offerlo buy or sell any security referred 10 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 BellOn to be laken by Ihe subscnber should be based on hiS own Invesllgatlon and Informallon Delafield, Harvey, Tabellinc ,as a corporation and Its officers or employees, may now haye, or may later take, POSitions or trades In respect to any securities mentioned In thiS or any future Issue, and such posItion may be dllferent from any vtews now or hereafter expressed tn thts or any other tssue Delafteld, Harvey, Tabell Inc, whtch tS regtstered with the SEC as an In\Jestmen! adVisor, may give adVice to Its Investment adVISOry and other customers tndependently or any statements made tn thiS or tn any other Issue Further information on any security menttoned herein IS avatlable on request

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Tabell’s Market Letter – May 12, 1989

Tabell’s Market Letter – May 12, 1989

Tabell's Market Letter - May 12, 1989
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U'J.ii.\ ISlE n.. n..' S J.ii.\1Rl IEU' n..IEYYIER 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 May 12, 1989 We often attempt to find ideas for this letter in issues we have written previously. In searching.ou!'..ti1e.wJoundthat.-n.Aprii 8 . 1988. some six months after the crash, we published charts on four stocks which-we -til-ought -were illustrative ofiii,,- 80rtSofpatterns thathad formed -, up to that point. One way of viewing the ensuing year is to trace the development of these four since our letter. The chart at left is an exact reprint of the first year-ago exhibit. a one-point chart on Hershey Foods. covering the early 1960's to 1983. Our purpose in citing that chart was to indicate that multi-year bases. such as this one, were practically non-existent a year ago since such patterns (This one eventually produced a rise to over 200 after split adjustment for Hershey) had not. in the half-year following the crash. had time to form. In the year since that time. it is quite astounding how much base formation activity has taken place, and. interestingly, one stock that has undergone such activity is Hershey. whose pattern today. in its current capitalization, is shown at right. The base at 21-28 is almost as wide as the earlier one between 5 and 16, which took T from .1966to.1981to develop .-f-his-speedy-fomation-ofsuch48ttens-has-been.one. of-the -majo'—–I bullish developments of the past year. The second pattern we cited as typical last April was Ford. at left above on a two-paint-unit baSIS. (In all three of the graphs above. the arrow indicates the last posting of the chart when originally published.) We noted that this was the most common sort of pattern at that time. having produced a base implying a test of its 1987 high but not a great deal more. As can be seen, such a test has ensued. The subsequent lateral formation at 56-48 can now be viewed as a potential top which, given a downside breakout to 46. would imply a test of the crash lows. We cited International Paper center. 2-point, as a more bullish pattern based on the fact that its 1987 reaccumulation pattern was a great deal broader than that of Ford and was. at that time. sufficient to suggest penetration of pre-crash highs. 80 far the stack has not shown significantly better action. but the pattern has continued to develop positively. and ultimate penetration of 1987 peaks continues to be indicated now J as it was then. Finally. we showed the two-point chart on IBM (right) and noted that its pattern looked more like distribution than accumulation. the stock being at that time close to its October. 1987 low. Following interim strength (including a false breakout in early 1989), it has moved back to where it was a year ago, and the stock, despite a 700-point move in the Dow, is today within a few points of its crash bottom. Given this sort of relative strength, no immediate move appears indicated. It is. we think, the interplay between developing patterns such as these which will govern intermediate-term market action. On the bullish side, one can note the accelerated development of bases in such stocks as Hershey and the continued positive action shown in patterns similar to IP. On the other hand. potential tops, as in Ford, are beginning to develop in some cases, and desultory patterns like IBM's are still not uncommon in major issues. ANTHONY W. TABELL DELAFIELD, HARVEY. TABELL INC. Dow Jones Industrials (1200) 2421.74 8 & P 500 (1200) 311.44 Cumulative Index (5/11/89) 4405.66 AWTebh No statement or expression 01 opInion or any other matter herein contained IS, or IS to bedeemed to be, directly or Indirectly, an offeror the solicitation of an offer to buy orsel1 any secunty referred to or mentioned The matter IS presented merely lor the convenience of the subscnber While we beheve the sources of our Information to be reliable, we In no way represent or guarantee the accuracy thereof nor althe statements made herein Any action to be taken by the subscnber should be based on hiS own investigation and informatIOn Delafield, Harvey, Tabell Inc, as a corporation and lIs 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 pOSllton 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 Its Investment adVISOry and other customers Independently 01 any statements made In thiS or In any other Issue Further Information on any secunty menlloned herein IS available on request

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Tabell’s Market Letter – May 19, 1989

Tabell’s Market Letter – May 19, 1989

Tabell's Market Letter - May 19, 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 (6091987-2300 May 19, 1989 The stock market staged a satisfactory follow-up to 18St week's rally. as it posted further new 'e!- ….. bullmar.ket. highs. in…..thJs .,-Y'ek!s trading ..–..In .!hepces,s. itshrugge.!t- oie n!'lsL..a CPl increas..e, ,,,………..,.. which would. in all probability. have sent it reeling a few' months ago. Certainly. current -; behavior seems to indicate that the course of least resistance is upward4 If all this seems a bit strange to many investors, there exists some justification. Yesterday was the 400th trading day since October 19, 1987. The spectacle of a market developing new peaks in upside rnomentum—and that is what this market seems to be doing—at this late a date is. if not unprecedented, at least historically unusual. Simple measures are often the best, and a measure of market momentum which suffices for many purposes is a simple 125-day (six month) rate of change. That measure (the monthly high is plotted) is shown as the lower line on the chart below, which covers a 43-year history for the Dow Jones Industrial Average. DOW JONES INDUSTRIRL RVERRGE – – – – – – – – – 1HIGH DF 125 DW.).Cjl8NGE…., As the chart quite clearly shows, most major upswings in the past have been accompanied by well defined momentum peaks. For the most part, these peaks have tended to occur very early in the upside move. In all but two cases during the period shown, the momentum peak for major bull markets occurred in the first half of the move's timespan, and. in the majority of cases, momentum topped out in the first third of the bull market's duration. In the 21-month upswing lasting from December, 1974 to September, 1976, for example, the momentum peak was attained after six months, in June, 1975. Prior to the 1960's, the peaks also tended to occur when upside moves still had a long way to go. In the bull markets from 1949 to 1962, momentum peaks occurred before half the total move had been completed The 1957 bull market began at 420 on the Dow. Momentum topped with the DJIA at 565. It ultimately reached 735 However this pattern subsequently changed. After 1966. well over two-thirds of the bull market's percentage advance tended to be over by the time momentum topped out. Following May. 1970, momentum hit its high after the Dow had moved from 631 to 948 The final peak was 1052. The question at the moment. of course, is whether the new high in momentum indicates a further protracted market rise. On the face of it. this could be the case. But. as noted above, a momentum peak this late is unusual. A high in momentum has occurred later than 400 days into a bull market only three times in the past, in 1966-68, 1978-80, and 1984-87. In the latter case, the move was barely half over when momentum topped. but in the other two cases, more than 80 of the move, both in time and amplitude. had taken place. Thus, the message being sent by increasing upside momentum at the moment remains somewhat ambiguous. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC Dow Jones Industrials (12 00) S P 500 (1200) Cumulative Index (5/18/89) 2493.95 321.26 4497.08 AWTebh No statement or expression of opinion or any other matter hereIn contained IS, or IS to be deemed to be, dlrecUyor mdlrectly, an offer Ot the solicl1al1on of an offer to buy or sell any security referred to or menlloned The matter IS presented merely for the convemence of the subSCriber While we believe the sources of our mformatlon to be reliable, we 10 no way represent or guarantee the accuracy thereof nOt of the statements made herem Any action to be taken by the subscnber should be based on his own investigation aod Informalton Delafield, Harvey, Tabelllnc, as a corporallon and Its officers or employees, may now have, or may later take, POSitions or trades In respect to any securilies 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 Its Investment adviSOry and other customers mdependently of any statements made In thiS or In any other Issue Further mformaMn on any security mentioned herein IS avatlable on request

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Tabell’s Market Letter – May 26, 1989

Tabell’s Market Letter – May 26, 1989

Tabell's Market Letter - May 26, 1989
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TABELL'S MARKET LETTER … I I. ,.- 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 – May 26, 1989 …,-,-.–.,,– We-had –occasion4his-weektrtake-a-look -ahoary 'marktindicator -that iscp robably-;o—,….-,,-11 in many ways, out of date—the ratio of Standard & Poor's Low-Priced Stock Index to its High-Grade Stock Index. The original purpose of this indicator was to identify the existence of speculative activity, the low-priced stocks originally being conceived as those speculative issues with a public following, while the high-grade issues were taken to be those favored by conservative investors. An increase in the ratio .. therefore, tended to signify rising speculation, while a decrease suggested the opposite. The indicator can be criticized today largely on the grounds that the Low-Priced Index tends to consist of stocks that have been deservedly ignored and that more sophisticated tools for measuring secondary-stock activity (The Value Line Composite and NASDAQ Indices) are available. Nonetheless, the long sweep of the indicator—the figures are available back to 1926—makes it worth study. There has been a fair amount of consistency to the ratio's behavior. It tends to bottom out coincidentally with or shortly after major bottoms, this bottom being followed in most cases by a very sharp expansion. The rate of this rise tends to peter out fairly early on, following which the ratio itself tends to top out. These two events generally occur with substantial lead time on peaks in the major averages. There are. of course. difficulties. The lead time for the peak in the ratio is often so substantial as to make timing difflcult. There is, furthermore, the odd case of aberrant behavior. In the 1962-1966 bull market, speculative activity continued to increase merrily until a couple of months after the market had peaked, and in 1976-1978, the ratio actually moved ahead during a bear market and continued its rise throughout the subsequent bull market. A look at the current scene indicates the possibility of like strange behavior. The —iil.pIr-o.b-lTemheirse that was there has been, – a mna expansion since the between 1987 Dece bottom, hardly any ri mber, 1987 and-June, se in 1988, the at ratio at the end of which time the 6-month rate of change had reached 14.7 This is an absurdly low figure, considering that the range for this statistic over the past nine bull markets had been 25 to 54 The ratio itself has peaked out, so far at least, in September, again after showing by far the smallest rise for any bull market in the past 40 years. We have. in other words, enjoyed a bull market without. to date, any increase in what used to be considered speculative activity. This is a phenomenon totally without precedent over the past four decades. Now there are various conclusions that can be drawn from all of this. One, of course, is that a speCUlative phase will, somewhere along the line, duly emerge. This was the case in the 1962-1966 market referred to above, where the bulk of the move, from June, 1962 to May, 1965, took the Dow up some 75 in a fairly orderly fashion. The final upswing in 1965-1966 moved the DJIA hardly at all but featured a burst of activity in secondary stocks. (This is believed by many to be the usual ending for a bull market. Actually it is the exception rather than the rule.) There exists another explanation for the behavior of the Low-Priced/High-Grade ratio—that its current downturn is secular. The ratio, in July, .1983 stood at 4.65. The last time it had been this high, interestingly, was in 1926. From that time, it essentially continued to decline throughout the entire remainder of the bull market. Its increase since the 1987 lows, as noted above, has been miniscule. The reason for this may be found in the record of the Low-Priced Index itself. At the ratio's high, on July 6, 1983, that indicator was at 608.7. It did not exceed this high until 4 years later, in August, 1987, and only by a modest 16 At that point the Dow was 118 over its 1983 peak. On a short-term basis, below-average action continues. On May 17th the Low-Priced Index was just barely above its high of February. The Dow, by contrast, was over 5 above its year-earlier peak. It is conceivable, therefore, based on some 6 years of experience, that we have seen the start of a long secular downturn in relative action of secondary stocks. Only time will tell whether this pattern will continue or reverse to a more normal configuration. Dow Jones Industrials (12 00) S & P 500 (12 00) Cumulative Index (5/25/89) AWTlt 2493.77 320.66 4536.74 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. No statement or expreSSion of oplnton or any other maner herein contained IS, or IS to be deemed to be, directly or Indirectly, an offer or the soliCitation of an offer to buy Of sell any security 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 rellab!e, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any aciran to be taken by the subscriber should be based on hiS own Investigation and Information Delafield, HaNey, TabeU Inc, as a corporation and lIs oHlcers or employees, may now have, or may later take, poSitions or trades In respect to any secuntles mentioned In thiS or any future Issue, and such pOSition may be dlflerent from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabelllnc, which IS registered wlth1he SEC as an mvestment adVisor, may give adVIce to ItS mvestment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further Information on any securlly menltOned herein IS available on request

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