Tabell’s Market Letter – June 30, 1989

'1l'&.\ IBlIE IL.IL. S &'\IRZ 1E'1l' 1L.1E'1l''1l'1E1Rl 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 085435209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (6091987-2300 June 30, 1989 1 ''Wediscussed.in this..spacetwoweeksago .thetIading .range. hetwee241q…and. 2510, 'owhichhad contained the Dow since the latter part of May. As recently as a week ago, it seemed as if an upside breakout from this range had occurred, as the average posted a new closing bull-market high at 2531.87 last Friday and followed it up with an intra-day peak on Tuesday of this week. That breakout turned out to be false, and the market plummeted back through the entire range on the last three days of the week, posting a downside penetration on Thursday, which was extended on Friday morning. It is difficult to see why all this should cause immediate concern. The broadened top now suggests a downside objective of 2400-2380 which, if reached, would simply produce the first 5 correction since November. The bull market is now 425 trading days old and has posted, through last Friday, an advance of 45.62. There have been, in the modern era, three cycle bull markets which have peaked with lesser advances (1946-48, 1966-68, and 1978-80, but the eight other rises posted moves in the 66-150 range before their conclusion. Except for 1982-1983, all of the bull markets in question lasted longer than this one has So far. The most recent phase of the rise, from November 16, has involved a 24.2 advance over 151 trading days. It has, as noted above, seen no correction greater than 5 and, indeed, the current one is the greatest since March. An inspection of past cycle bull markets reveal that upswings of approximately this extent and duration are a fairly frequent occurrence at this stage of an advance—one to two years into the rise. Interestingly, the highs for these latter-day advancing phases generally tend not to be the bull market highs, although often they are fairly close to it. That peak, however, is generally attained Some months later. Comparable rallies which can be cited are the 129-day, 21.7 advance in November, 1971-May, 1972; the 28.9, 140-day rally in October, 1975-April, 1976; and the 28.4, 107-day upswing of April-September 1980. The very fact that a new high was posted just last week tends to suggest the lack of immediate market risk. The following table shows the high date for the last 12 cycle bull markets – –andthenshows-thelae-followingthbUUnt1lrket-highn1wtriCh-theJJow traijedwitliill2-;or,,—-II- 7, and 10 of its peak. The figures in parentheses are the number of trading days between the high and the date shown. BULL MARKET LAS T D ATE WIT H I N A G I V E N 0 F H I G H HIGH 2 5 7 10 May 29, 1946 Jun 15, 1948 Jan 5, 1953 Apr 6, 1956 Dec 13, 1961 Feb 9, 1966 Dec 3, 1968 Jan 11, 1973 Sep 21, 1976 Apr 27, 1981 Nov 29, 1983 Aug 25, 1987 Jun 17, 1946 (12) Nov I, 1948 (l00 Mar 25, 1953 (55) Jul 26, 1957 (328) Mar 19, 1962 (65) Feb 17, 1966 (6) May 16, 1969 (109) Jan 12, 1973 (1) Jan 3, 1977 (70 Jun 23, 1981 (40) Jan 19, 1984 (35) Aug 27, 1987 (2) Aug 15, 1946 Nov 4, 1948 Apr 2, 1953 Aug 9, 1957 Apr 6, 1962 Apr 26, 1966 May 29, 1969 Jan 26, 1973 Mar 17, 1977 Jun 30, 1981 Jan 27, 1984 Oct 5, 1987 (54) Aug 23, 1946 (60) (103) Feb 3, 1949 (172) (66) Aug 18, 1953 (158) (338) Sep 3, 1957 (354) (79) Apr 25, 1962 (90 (52) May 2, 1966 (56) (128) Jun 9, 1969 (124) (10) Oct 29, 1973 (200 (123) Apr 18, 1977 (144) (45) Aug 6, 1981 (71) (40 Feb 2, 1984 (45) (28) Oct 7, 1987 (30) Aug 26, 1946 (60 May 19, 1949 (264) Sep 9, 1953 (173) Sep 19, 1957 (366) May 8, 1962 (100) Jun 24, 1966 (94) Jun 18, 1969 (131) Nov I, 1973 (204) Jul 25, 1977 (211) Aug 20, 1981 (81) May 10, 1984 (113) Oct 13, 1987 (34) The figures show that in seven cases, the Dow remained within 2 of its high during periods ranging from 2 to 14 months. In 10 cases it returned to within 5 of that high over a similar period. Thus, taking the worst-case scenario—that last week's high was in fact a bull market peak—the immediate downside potential does not appear to be all that great. Now, we humbly admit that the above figures have appeared here before and that their last publication was on June 26, 1987, absent, of course, the last line which proved to be the major exception in 40 years of market history. All prior bull markets had seen the averages still not far from their highs after intervals of as long as 17 months following the actual posting of those highs. By contrast, we can all painfully recall that 1987 saw the market lose over one-third of its value in less than two months after attaining an all-time peak on August 25. Now it is perfectly proper that the sorrowful recollection of 1987 should make us wary, but it should not cause us to ignore the long years of market history which preceded it. That history tells us that the process of bull-market deterioration tends to be a slow one and that most major upswings do not, as 1987 did, immediately turn on a dime and begin a precipitous plunge. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (6/29/89) AWTebh 2426.78 360.93 4596.35 No statement Or expression 01 opinion or any other matler herein contained IS, or IS to be deemed to be, dlrecUy or indirectly, an offer orthe sohcttallOn of an offer to buyor 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 10 be reliable, we In no way represent or guarantee Ihe accuracy thereof nor of the statements made herein Any action to be taken by the subscnber should be based On hiS own investigation and Information Delafreld, Harvey Tabelllnc, as a corporatIOn and lis officers or employees, may now have, or may later take, POSlbons or trades In respect to any securrbes menboned In thIS or any future Issue, and such POSlbon may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabelllnc, which IS regIstered wlthlhe SEC as an Investment adVIsor, may gIVe adVice 10 tts investment adVISOry and other customers Independently of any statements made In this or In any other Issue Further InformellOn on any securIty menllOned herein IS available on request