Tabell’s Market Letter – June 23, 1989

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 , , ,r' June 23, 1989 in the stock market. In connection therewith, we have H-V' -OUUT published, at around this -time -'v each y e a r .'a – tabl e like the one below. which, for each of the twelve months, shows the number of times the market has advanced for each month, the number of declines, and the average percentage change. Our original studies covered the years from 1926 to date. We have extended our data bank for the Dow back to when it was first computed in 1897. The table below, therefore, covers 92 years of market history. Not surprisingly, perhaps, the ,conclusions are essentially unchanged from those based on the shorter period. One Month Periods (1897-1988) Two Month Per10ds (1897-1988) End Month Advances Declines Average Chg. Advances DeclInes Average Chg. January 58 33 1. 09 59 32 2.46 February 44 47 -0.25 52 39 0.84 March 54 38 0.70 44 48 0.36 April 50 42 0.86 53 39 1. 61 May 45 47 -0.36 48 44 0.61 June 48 44 0.70 46 46 0.30 July 56 36 1. 40 56 36 2.09 August 61 30 1.77 61 30 3.43 September 36 55 -1. 28 53 38 0.43 October 50 41 -0.10 40 51 -1. 33 November 54 37 0.67 53 38 0.64 December 66 26 1. 38 — —– TOTAL 622 476 0.55 63 29 — — 628 470 1. 94 -;-;2 o .HC .au,c 01 tne 1U.. smce 1., OH- -or 57' 'C been au, ,;'V'HO Iiiid 476—or 43—have showed declines. Thus, the normal expectation for any given month wuuu be 52-53 advances and 39 -40 declines. Similar figures can be adduced for two-month periods. From the data above, we have been able to extract four patterns of a seasonal nature which seem to be statistically significant. The most significant one is the least known, the tendency toward a market decline in the month of September. Since 57 of all months since 1897 have been rising ones, the expectation would be a plurality of advances over declines. However, precisely the opposite is the case for September, which, in 92 years, has produced 55 declines and only 36 advances, with an average drop of 1.28 percent. The probability of such a pattern being due to chance, a chi-square test tells us, is less than 1 in 1000. The next most significant pattern has been the year-end rally, illustrated by 66 rising Decembers in 92 years. Our readers know that we have published an annual comment on this phenomenon around December or January of each year. Another seasonal n,anifestation, which we have demonstrated based on data since 1926, although we have no idea of the reason therefore, has been the fact that the direction in which the market moves in November has appeared to be a moderately successful predictor of the market's direction for the following year. Of the four seasonal phenomena, the least significant has been the summer rally, which is due to be analyzed at this juncture. As the table shows, the 56 advances and 36 declines for July are marginally better than one would expect. August shows an even greater aberration. The percentage advances for July and August, along with that for the two-month period ending in August, are the largest figures in the table, although December-January performance is close. Despite these figures, standard tests of statistical Significance suggest that the summer rally is a less reliable phenomenon than the others noted above. It has been even less reliable recently. especially in July, with five of the seven Julys since 1982 having been down months. Last year, indeed, is a good reminder that strong statistical probability falls short of certainty. Both July and August, 1988 were down months, the latter a severe oneoSeptember, then produced a strong rally. While Decemher, as suggested, was an upward month, the advance was only 2.56. There seems, incidentally. to have emerged in recent years a brand new tendency—the occurrence of important market turning points during the summer months. Major market bottoms took place on August 12, 1982 and July 24, 1984. In the opposite direction, the top leading to the 1983 – 1984 decline began to form during the summer of 1983 and, of course, the all-time high for the Dow, preceding the 1987 crash, occurred on August 25, 1987. The October-December, 1987 low was a return to the normal pattern of fall reversals. however. AWTebh Dow Jones Industrials 02 00) S & P 500 (1200) Cumulative Index (6/22/89) 2507.21 324.25 4634.76 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. No statement or expression of Opinion or any other matler herein contained IS, or IS to be deemed to be, directly or Indirectly, an oHer or the soltCltatlon of an oHer to buy or sell any security referred to or mentioned The mailer IS presented merely for the convenience of the subSCriber While we belteve 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 action to be taken by the subscriber should be based on hiS own investigation and Information Delafield, Harvey, Tabelllnc, as a corporation and ItS officers or employees, may now have, or may later take, pOSlons or trades In respect to any secunlles 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 Detafleld, Harvey, Tabelllnc, which IS registered With the SEC as an Investment adVIsor, may glve adVIce to Its Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further Informahon on any securrty mentioned herein IS available on request