Viewing Month: October 1989

Tabell’s Market Letter – October 06, 1989

Tabell’s Market Letter – October 06, 1989

Tabell's Market Letter - October 06, 1989
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'1l'lIi.\ alE D.. D.. ' S IiUiJ lIi.\ IRi 1E'1l' D..1E'1l''1l'1E1Rl 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 1609) 987-2300 – -I— — – — – – – – – – – – – – – – – -October6,1989 I—' Having suffered through four weeks of relatively poor short-term action in September, the first week of October has indeed provided a welcome relief, i.e., an 80 point advance in four trading days to date. An interesting and perhaps simplistic way to explain away the poor market action in September is to re-examine a significant seasonal pattern in the stock market—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 56 declines, including this year, and only 36 advances with an average drop of 1.28. The probability of such a pattern being due to chance, a chi-square test would reveal, is less than 1 in 1000. However, what has really changed Approximately two months ago on August 8, the DJIA posted a new high of 2699.17, and the advance/decline breadth line also posted a new high, confirming the advance. Since then, the DJIA has posted seven successive new highs, and, in each case, this has not been confirmed by a new high in market breadth. In spite of the 80 point advance in the Dow Jones Industrial Average this week, there continues to exist a negative short-term breadth divergence. Although recent improvement in market breadth is apparent, currently needing 1329 net advances over declines to confirm a continuance of the bull market, a confirmation is still needed. We are fast approaching the second anniversary of the October 19, 1987 major bear-market low. Since that time, the two-year-old bull market has to date scored an impressive advance of 59.5. Having posted a new record high yesterday, it would indicate that this .-l…. ..m…,ajor-cycle upswing has more room on the upside. That is not to say that the toppinog-I process. which recent readers of this letter have been alerted to, can begIn at any time. – Recent strength in the DJIA has, for the time being, canceled the potential top which previously existed. However, future market action CQuld broaden the potential top As we have noted from past history, a characteristic of major market tops is that they tend to form over a lengthy period of time. In any case, a significant top were it to develop, still would not be confirmed unless the DJIA were to break below the 2630 level. The clue to the direction of the stock market may still be found in terms of individual stock patterns. While most stocks have been in uptrends prior to this week's market action, minor deterioration had been confined to the formation of short-term tops in defensive-industry groups that have been market leaders over the past year, food stocks being an obvious group, and Coca-Coia, an excellent example. With the action of this week, however, many of these stock patterns have improved dramatically, as in the case of Coca-Cola, posting new record highs This improvement, coupled with the continued improvement in the cyclical, heavy-industry issues and in the energy sector, is, of course, encouraging. Short-term action, this week, continues to suggest that the current bull market has further to go, and the minor 3.38 decline in September was nothing more than a normal short-term downswing. However, it is also quite clear that upside activity, because of the longevity of the ongoing bull market is becoming more selective. This, together with rotational market leadership shifting into new areas (possibly from the consumer goods area into capital goods), should be monitored closely. Although this week's market action has been most impressive to date, we must not lose sight of the potential problems that were with us in the past few months, as the stock market goes higher. ROBER T J. SIMPKINS, JR. DELAFIELD, HARVEY, TAB ELL INC. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (10/5/89) 278742 358.35 4962.20 AWTebh No statement 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 solicllatron of an offer to buy or sell any secUrity referred to or menboned The matter IS presented merely for the convemence of the subscnber 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 herein Any aellon to be taken by the subscnber should be based on hiS own In\'estlgatlon and Informaton Delafield, Harvey, Tabelllnc, as a / corporation and rts officers or employees, may now ha\'e, or may later take, poslliOns or trades In respect to any secuntles mentioned In thiS or any future Issue, and such poSition may be different from any \'Iews now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabelllnc, which IS registered With the SEC as an Investment adVIsor, maY9IVe adVIce to Its Investment adViSOry and other customers independently of any statements made In this or In any other Issue Further Informallon on any security menboned herein Is available on request

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Tabell’s Market Letter – October 06, 1989

Tabell’s Market Letter – October 06, 1989

Tabell's Market Letter - October 06, 1989
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1Lii.\ IIUE n. n. ' S Lii.\RIE'U' n.1E'U''U'IER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEM8ER NEW YORK STOCK EXCHANGE, INC MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – October 6, 1989 -I—'- ———-.——– ——-''-' Havillg suffered through four weeks of relatively poor short-term action in September, the first week of October has indeed provided a welcome relief. i.e., an 80 point advance in four trading days to date. An interesting and perhaps simplistic way to explain away the poor market action in September is to re-examine a significant seasonal pattern in the stock market—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 56 declines, including this year, and only 36 advances with an average drop of 1.28. The probability of such a pattern being due to chance, a chi-square test would reveal, is less than 1 in 1000. However, what has really changed Approximately two months ago on August 8, the DJIA posted a new high of 2699.17, and the advance/decline breadth line also posted a new high, confirming the advance. Since then, the DJIA has posted seven successive new highs, and, in each case, this has not been confirmed by a new high in market breadth. In spite of the 80 point advance in the Dow Jones Industrial Average this week, there continues to exist a negative short-term breadth divergence. Although recent improvement in market breadth is apparent, currently needing 1329 net advances over declines to confirm a continuance of the bull market, a confirmation is still needed. We are fast approaching the second anniversary of the October 19, 1987 major bear-market low. Since that time, the two-year-old bull market has to date scored an impressive advance of 59.5. Having posted a new record high yesterday, it would indicate that this major-cycle upswing has more process, whiCh recent readers room on the upside. That is not to of thiS letter have been alerted to, say can that the begin at atonpypitnIgme.——4 Recent strength in Ihe DJIA has, for the time being, canceled the potential top which previously existed. However, future market action could broaden the potential top. As we have noted from past history, a characteristic of major market tops is that they tend to form over a lengthy period of time. In any case, a significant top were it to develop, still would not be confirmed unless the DJIA were to break below the 2630 level. The clue to the direction of the stock market may still be found in terms of individual stock patterns. While most stocks have been in uptrends prior to this week's market action, minor deterioration had been confined to the formation of short-term tops in defensive-industry groups that have been market leaders over the past year, food stocks being an obvious group, and Coca-Cola, an excellent example. With the action of this week, however, many of these stock patterns have improved dramatically, as in the case of Coca-Cola, posting new record highs. This improvement, coupled with the continued improvement in the cyclical, heavy-industry issues and in the energy sector, is, of course, encouraging. Short-term action, this week, continues to suggest that the current bull market has further to go, and the minor 3.38 decline in September was nothing more than a normal short-term downswing. However, it is also quite clear that upside activity, because of the longevity of the ongoing bull market is becoming more selective. This, together with rotational market leadership shifting into new areas (possibly from the consumer goods area into capital goods), should be monitored closely. Although this week's market action has been most impressive to date, we must not lose sight of the potential problems that were with us in the past few months, as the stock market goes higher. ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (10/5/89) 2787.42 358.35 4962.20 AWTebh No statement or expressIon of opinion or any other mailer herein contained IS, or IS to be deemed to be, directly or indirectly, an offer or the solicllallon of an offer to buy or sell any secunty referred 10 or mentioned The matter 15 presented merely for the convenience of the subscnber While we believe the sources of our Information to be reliable, we In no way represent or guaranlee the accuracy thereof nor oflhe statements made herein Any acllon 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, posrtlons or trades In respecllo any secuntJes mentioned In thiS or any Mure Issue, and such posrtlon may be different from any views now or hereafter expressed In Ihls or any other Issue Delafield Harvey, Tabell Inc, which IS registered wllh the SEC as an Investment adVisor, may give adVice to Its Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further Iflformatlon on any securrty mentlOfled herein IS available on request

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Tabell’s Market Letter – October 13, 1989

Tabell’s Market Letter – October 13, 1989

Tabell's Market Letter - October 13, 1989
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (6091 987-2300 October 13, 1989 –.-, TheJ)-w ',Jones.!,-,dustrial-Average -failedthis-week-!toimprove'onthe .9-point-advance ,,,,,'I.,….. posted the first week in October, Although still flirting with new highs, this mature, ongoing bull market continues to show signs of being tired, as reflected in the recent, poor, short-term breadth of the market action, and. also, the possible long-term reduction in daily volume on the NYSE. As we have previously mentioned, since August 8, a minor. short-term breadth divergence has occurred. To update this series. the net advance/decline index, shown on the chart below, which currently stands at currently -2278, is now 47 days old. During this same time period, the DJIA has posted ten successive new highs. Clearly, the strength in the market continues to be fueled by the participation of fewer and fewer stocks. Average daily volume on the NYSE declined 11.6 in September (151.8 million shares) versus August (171.7 million shares). On the surface, this in itself may not be significant, but looking at the series over the longer term is instructive. A 100-day moving average of NYSE daily volume is shown on the chart above. Historically, the long-term trend of volume has moved in concert with the trend of the market averages. This would make sense as the demand for stock is dependent on volume. From the post-war period until 1966, both NYSE volume and the DJIA moved in a secular rising trend with new highs in average daily volume being confirmed by new highs in the DJlA. The secular rising trend in the DJIA was, however, arrested for approximately 16 years as the DJlA was unable to penetrate the 1000 level, this occurring while new record highs in average daily volume continued to be posted. From the August, 1982 low, the DJIA decisively penetrated the 1000 level, and, again. the DJIA and average daily volume resumed their upward secular trend. However, since the October 1987 decline, for the first time, it appears the secular uptrend of this volume series has peaked and may be, in fact, in a downtrend. If there has never been a major bull market against a declining trend in volume, and if the secular trend of this series has, in fact, turned down this indicator may be issuing a warning. The central theme of this letter, over the past few months, has been one of cautious optimism. Two years ago, on. October 19, 1987, the DJIA closed at 1738.74. Five hundred trading days later, the DJIA is up over 1000 points, or 60.34.1f you assume October, 1987 was a major cycle low. both the percentage advance and the duration of the cycle measured by past cycles, are becoming full grown. This is not to say the market cannot move higher. However, it is important to continue to monitor series such a8 market breadth. and daily NYSE volume, to watCh for potential market weakness. ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) 2738.93 S & P 500 (1200) 355.03 Cumulative Index (10112189) 4921.08 RJS ebh No statement or expressIon of opinion or any other matter hereIn contained IS, or IS to be deemed to be, directly or Indirectly, an offeror the SOlltltatlon of an offer to buy or 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 reliable, we In no way represent or guarantee the accuracy thereof nor olthe statements made herein 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, positions or trades In respect to any securities menboned 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 Delaheld, Harvey Tabelllnc, which IS registered With the SEC as an Investment adVisor, may give adVIce to Its / Investment adVISOry and other customers Independently of any statements made In thiS Of In any other Issue Further information on any security mentioned herem IS available on request

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Tabell’s Market Letter – October 13, 1989

Tabell’s Market Letter – October 13, 1989

Tabell's Market Letter - October 13, 1989
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 October 13, 1989 — — The DoW-Jon-eslTdustrial oLA verage ….failed–this-Lweeko—improve-'onthe 92 …pointadance posted the first week in October. Although still flirting with new highs, this mature, ongoing bull market continues to show signs of being tired, as reflected in the recent, poor, short-term breadth of the market action, and, also, the possible long-term reduction in daily volume on the NYSE. As we have previously mentioned, since August 8 J a minor. short-term breadth divergence has occurred. To update this series, the net advance/decline index, shown on the chart below, which currently stands at currently -2278, is now 47 days old. During this same time period, the DJIA has posted ten successive new highs. Clearly, the strength in the market continues to be fueled by the participation of fewer and fewer stocks. Average daily volume on the NYSE declined 11.6 in September (151.8 million shares) versus August (171.7 million shares). On the surface, this in itself may not be significant, but looking at the series over the longer term is instructive A 100-day moving average of NYSE daily volume is shown on the chart above. Historically, the long-term trend of volume has moved in concert with the trend of the market averages. This would make sense as the demand for stock is dependent on volume. From the post-war period until 1966, both NYSE volume and the DJIA moved in a secular rising trend with new highs in average daily volume being confirmed by new highs in the DJIA. The secular rising trend in the DJIA was, however, arrested for approximately 16 years as the DJIA was unable to penetrate the 1000 level, this occurring while new record highs in average daily volume continued to be posted. From the August, 1982 low. the DJIA decisively penetrated the 1000 level, and, again, the DJIA and average daily volume resumed their upward secular trend. However, since the October 1987 decline, for the first time, it appears the secular uptrend of this volume series has peaked and may be, in fact, in a downtrend. If there has never been a major bull market against a declining trend in volume, and if the secular trend of this series has. in fact, turned down, this indica tor may be issuing a warning. The central theme of this letter, over the past few months, has been one of cautious optimism. Two years ago, on October 19, 1987, the DJIA closed at 1738.74. Five hundred trading days later, the DJIA is up over 1000points, or 6034.ICyou assume October', 1987 was a major cycle low, both the percentage advance and the duration of the cycle, measured by past cycles, are becoming full grown This is not to say the market cannot move higher. However, it is important to continue to monitor series such as market breadth, and daily NYSE volume, to watch for potential market weakness. ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) 2738.93 S & P 500 (12 00) 355.03 Cumulative Index 00/12/89) 4921.08 RJS ebh No statement or expression of opInion or any other mailer herein contained IS, or IS to be deemed to be, directly or Indirectly, an offer orthe sohcrtallon 01 an offerlo buy or sell any security referred to or mentioned The matter IS presented merely for the convenience 01 the subscriber While we beheve the sources of our Information to be rellable, 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 InvestlgatlOn and Information Delafield, Harvey, Tabellinc ,as a corporation and ItS oNlcers or employees, may now have or may later take, poSitions or trades In respect to any secun\les mentioned In thiS or any luture Issue, and such poSition may be dlffcrcntlrom 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 ns Investment adVisory and other customers mdependently 01 any statements made In Ihls or In any other Issue Further information on any security mentioned herein 15 available on request

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Tabell’s Market Letter – October 20, 1989

Tabell’s Market Letter – October 20, 1989

Tabell's Market Letter - October 20, 1989
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——- ———————————————-. TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 October 20, 1989 .-…T.w..oim,p-ortan t … mar,ket…..e. vents…occur.red i ntheJ'-pastweekThe f-ir-st, -and.for J obvious-reasons .'—-'– -,,-. the most Widely'remarked, was the unpleasantness of last Friday afternoon, during the course of which the Dow fell by almost 200 points on near-record volume. The ensuing weekend. unsurprisingly, produced an outburst of comparisons with the break of October 19, 1987, The week's second noteworthy event was the anniversary of that crash yesterday, which the market celebrated by staging a fairly impressive 39-point rally, It is perhaps useful to consider the former event in terms of the latter. Let us, then, recall some data conceming the 1987 crash. It involved a percentage drop for the Dow of 36.13, and there can be no doubt that a fall of this magnitude enables us to regard the decline as a major bear market. However. as bear markets go. that percent decline is not particularly impressive. On the list of major bear markets of this century J it ranks somewhere in the middle. Looking at fairly recent history, we find that 'the bear market of 1973 – 1974 produced a much larger percentage deciine—45.08. 1968 – 1970. during the course of which the Dow fell 35.94, was almost as great a fall as the current one. The 1987 bear market, in other words, is not especially noteworthy for the amount by which it declined; it is remembered for the speed with which that decline, compressed into 38 trading days. took place. That time period was the shortest for any decline of 20 or more in this century. Now let us look at the past week. What happened, reduced to simple numbers, is that the Dow fell 7.96. This figure is hardly impressive. It fails to qualify as a full-scale intermediate-term decline, and. indeed. has been exceeded by two short-term drops within the current bull market—in January, 1988, and in April – May, 1988. Like 1987, it is important not for its extent but for its timeframe, the entire fall having taken place in just four trading days with the bulk of it occurring on the final day. There have been shorter declines of the same approximate magnitude. but not many-. Only nine falls of greater than 5 have been completed in three days or less, seven of those having , —GCCurred…. in–the-l920tsnd96's. Sjilce-th–eeen, sinceI926721-S–sliCnaecime-s. last – – week's ranks pretty high on the list. In other words. we saw in 1987. a cycle bear market compressed into an all-time-record short timeframe. We saw in mid-October, 1989 a short-term downswing similarly compressed into a unusually short period of time. There exists, in our view, an explanation as to why two such events should have occurred within just two years. and that explanation involves the current structure of securities markets. It is a subject too complex to go into here, and we intend to consider it in a later essay. What is important to remember at this point is that we have seen, so far, nothing more than a fairly typical short-term decline. The crucial question centers around whether or not it will develop into something worse. We think it is possible that it might do so, but feel it is unlikely to turn into anything a great deal more serious. Downside objectives in the mid-2400's for the Dow remain, and these objectives, if reached, would extend the decline to a bit over 10, the usual benchmark for a fall of intermediate-term proportions. The occurrence of such a drop in the mature stage of a bull market would hardly be without precedent. Typical examples would be August 1956 – September 1957, May – June 1965, or September 1967 – March 1968. In all of these cases, the Dow declined by a bit more than 10 and then went on to equal or exceed its level at the start of the decline, although not by significant amounts. This, we think, is the most likely scenario today—a test of Friday's lows, perhaps involving modestly lower lows, followed by a resumption of the bull market exceeding the 2791.41 high of October 9. The plausibility for this scenario CQuld, of course, be altered by later events. The broadening of existing tops, could, if it occurs, convince us that the bull market indeed ended a fortnight ago, a conclusion W!!wedo,not tink .. theevidencjustifies.at-thistime …. On the ,.. other side, strong rebasing action could easily persuade us that new lows over the short term are less likely than they appear to be at the moment. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) S & P 500 (12 00) Cumulative Index (0119189) 2674.79 347.02 4844.47 AWTebh No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or Indirectly, an oHer or the soliCitation of an oHer to buy or 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 rehable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subSCriber should be based on hiS own investigation and Information Delafield, Harvey, Tabellinc , 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 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 Independently of any statements made In thiS or In any other 1ssue Further Informallon on any secunty mentioned herein IS available on requesl /

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Tabell’s Market Letter – October 20, 1989

Tabell’s Market Letter – October 20, 1989

Tabell's Market Letter - October 20, 1989
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,——————————————————————————- TABELL-S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 1609) 987-2300 October 20, 1989 '- – –rwo impotanLmar-ket..,..,.e.vent8 -occurred……in…. the Lpast—week. –T-he-f-irstrsnd for'-Obvious-'!oreasons, – – the most widely remarked. was the unpleasantness of last FrIday afternoon, during the course of which the Dow fell by almost 200 points on near-record volume. The ensuing weekend, unsurprisingly, produced an outburst of comparisons with the break of October 19. 1987. The week's second noteworthy event was the anniversary of that crash yesterday, which the market celebrated by staging a fairly impressive 39-point rally. It is perhaps useful to consider the former event in terms of the latter. Let us, then, recall some data concerning the 1987 crash It involved a percentage drop for the Dow of 36.13, and there can be no doubt that a fall of this magnitude enables us to regard the decline as a major bear market. However. as bear markets go. that percent dechne is not particularly impressive. On the list of major bear markets of this century. it ranks somewhere in the middle Looking at fairly recent history, we find that the bear market of 1973 – 1974 produced a much larger percentage decline—45.08. 1968 – 1970, during the course of which the Dow feU 3594, was almost as great a faU as the current one. The 1987 bear market, in other words. is not especially noteworthy for the amount by which it declined; it is remembered for the speed with which that decline, compressed into 38 trading days, took place. That time period was the shortest for any decline of 20 or more 10 this century Now let us look at the past week. What happened, reduced to simple numbers, is that the Dow fell 7.96. This figure is hardly impressive It fails to qualify as a full-scale intermediate-term decline. and, indeed, has been exceeded by two short-term drops within the current bull market—in January, 1988, and in April – May, 1988. Like 1987, it is important not for its extent but for its timeframe, the entire fall having taken place in just four trading days with the bulk of it occurring on the final day. There have been shorter declines of the same approximate magnitude, but not many. Only nine -occufrarllesd'oif ng-rtehaet4e.rjjth2a0n's5nhdav1e93b0e'esntcnommnplle'tieedrein- htahvreee bdeaeyns, or le sifice ss, seven nr26-;-2T8 osfUchthdoe;s;-ec;h;laT.vini;n;-ge's;;-,-jl';a';s'-t–'–II week's ranks pretty high on the list. In other words, we saw in 1987 I a cycle bear market compressed into an all-time-record short timeframe. We saw in mid-October. 1989 a short-term downswing similarly compressed into a unusually short period of time. There exists in our view I an explanation as to why two such events should have occurred within just two years. and that explanation involves the current structure of securities markets. It is a subject too complex to go into here, and we intend to consider it in a later essay. What is important to remember at this point is that we have seen, so far, nothing more than a fairly typical short-term decline. The crucial question centers around whether or not it will develop into something worse. We think it is possible that it might do so, but feel it is unlikely to turn into anything a great deal more serious. Downside objectives in the mid-2400's for the Dow remain. and these objectives. if reached. would extend the decline to a bit over 10, the usual benchmark for a fall of intermediate-term proportions. The occurrence of such a drop in the mature stage of a bull market would hardly be without precedent. Typical examples would be August 1956 – September 1957, May – June 1965, or September 1967 – March 1968. In all of these cases, the Dow declined by a bit more than 10 and then went on to equal or exceed its level at the start of the decline, although not by significant amounts. This, we think, is the most likely scenario today—a test of Friday's lows, perhaps involving modestly lower lows, followed by a resumption of the bull market exceeding the 2791.41 high of October 9. The plausibility for this scenarIO could, of course, be altered by later events. The broadening of existing tops. could. if it occurs, convince us that the bull market indeed ended a fortnight ago. a conclusion which we do not thinkthe.evidencejustifies at ..thisatime.On….the'- otherside. strong rebasing action -could easilypersuade us that new lows over the short term are less likely than they appear to be at the moment. ANTHONY W. TABELL DELAFIELD, HARVEY. TABELL INC. Dow Jones Industrials (12 00) S & P 500 (12 00) Cumulative Index (10/19/89) 2674.79 347.02 4844.47 AWTebh No statement 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 soliCitation of an offer to buy or sell any security referred to or mentioned The matler 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 01 the statements made herein Any action 10 be taken by the subSCriber should be based on his own mvesllgatJon and InformatJon Delafield, Harvey, labelllnc, as a corporation and its officers or employees, may now have, or may fater take, pOSitionS or trades In respect to any securities mentIOned In thiS or any future Issue, and such poSition may be different from any vle-vs now or hereafter expressed In Ihlsor 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 Independently of any statements made m thiS or m any other Issue Further mforma1lOn on any security mentioned herem IS available on reques!

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Tabell’s Market Letter – October 27, 1989

Tabell’s Market Letter – October 27, 1989

Tabell's Market Letter - October 27, 1989
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. TABELL-S MARKET LETTER 600 ALEXANDER ROAD, eN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 1609) 987-2300 October 27. 1989 1 – – – -MondIafy-t hreecnoovwer- iyn;faimnoiusoma5a rDkeert2(ojf Fr-Idtanyent h-ew,1tla3 t'thfooc ko n-psltai tcuet ed a -this ' mTiuneis-Oaacytocboeurld19–.be1-9-t8e7r'm(aelnldathe;..eo-.. mini-January 23. 1987. On that day. for those who have forgotten. the Dow was up 64 points around 2 o'clock. down 50 an hour later. up 10. and finally down 44. Tuesday thus constituted a microcosm. the DJIA having been minus 85 points shortly after 1030. down only 32 at 11 o'clock, then. after losing about half this recovery, spurting to plus territory shortly before the close. All this provided reams of medIa COpy. There have been few market stories OYer the past couple of weeks which have not contained the words program trading somewhere in the vicinity of the lead paragraph. It was easy for the press to find quotable comments on this newly controversial issue. and most of them then tended to come down at one or the other polar extreme. The traditionalists' comments tended toward the apocalyptic, mixed with expressions of longing for a return to the good old 1950's. when the only things traded in Chicago were grown on farms. Remarks by the new era's apologists took a pious tone, with current academic buzzwords such as market liquidity and risk transfer being bandied about. A market technician is, after all, supposed to know something about markets, and. since the entire financial community has, by now, gotten into this act, we modestly add our own two cents' worth. The key word in the paragraph above is, it seems to us, market. In the perfect market we all learned about in Economics 1. lower prices tend to attract buying and diminish selling. and higher prices produce the reverse effect. Such, of course, is not always the case, as technicians implicitly discovered a century ago. when they first started talking about upside and downside breakouts. It has to be admitted. however, that a market worthy of the name must ultimately conform to the classic rules of supply and demand. To the extent that lower prices attract not buying, but, rather, additional selling, the entire market mechanism breaks down. -IL.iscer1ain4'al(uab1e.,-thatsuchacondltion—OQC.ill.r-ed-twwlsag.-anI–again–n-'r-\lesday'—-…,..-I–I morning. An analogy can perhaps be found in the post-I929 discovery that organized bear raids could. in fact, produce lower prices. The response to this was the uptick rule for short sales. It is worth noting that this particular rule was not the result of Solomonic wiSdom on the part of regulatory authorities, but. rather, evolved over nine years. A short-sale rule was first promulgated by the NYSE in 1930. The SEC was not given authority over such sales until 1934, and did not use it until 1938, when an extremely stringent rule was enacted. This rule was modified a year later to roughly its current form. The second point which needs to be made is that blaming program trading (or. correctly. index arbitrage. one form of program trading) for all existing ills may be a bit too facile. It is akin to blaming the man who sees a 50 bill lying on the sidewalk for bending over to pick it up. The aforesaid is not necessarily intended to be a defense of index arbitrage. Any institution, if it is to exist, must be able to justify its social utility, and we find ourselves having some difficulty so justifying this particular practice. However, to the extent that a problem exists, the root cause lies in the spreads between futures and what used to be called the market, now demoted to the cash market. Paradoxically, it can be theorized that such spreads could be eliminated by either one of two opposing approaches. The first would involve the elimination or effective crippling of derivative markets, and the second would focus on deepening and strengthening those markets so that arbitrage index spreads would have less tendency to appear and disappear more quickly when they did. We are dealing, let it be remembered. with what may simply be a structural flaw in the market mechanism, and such flaws are often -solved by purely technical changes. One recalls the triple witching-hour, which was engendering so much breast-beating a couple of years ago. The simple basing of settlements on opening rather than closing prices effectIvely eliminated the problem. In other cases, incremental experimentation and ongoing debate were necessary,,-,as .-exemplified by the history of short-sale 'rules in the 1930's. —-. …. – –,- Such experimentation has already begun with the so-called circuit breakers. and these devices mayor may not prove effective in decreasing intra-day volatility. The solution, however. is not likely to be found in ukases promulgated by authorities far removed from the marketplace, just as it is unlikely to be solved by pious incantations suggesting that everything is fine just as it is. More pragmatism and less extremism should, it seems to us, be -the order of the day. ANTHONY W. TABELL DELAFIELD. HARVEY, TABELL INC. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (10/26/89) AWTebh 2594.06 336.75 4797.69 No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or indirectly, an offeror the soliCitation of an offerla buy or sell any secunty referred to or mentioned The matter IS presented merely for the convenience of the subscnber While we believe the sources of our information to be rehable, we m no way represent or guarantee the accuracy thereof nor of the statements made herem Any action to be taken by the subscnber should be based on hiS own Ifwestlgatlan and Information Delafield, Harvey, TabeUlnc, as a corporation and ItS officers or employees may now have, or may later take, positions or trades In respect to any secuntles menliOned 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 With the SEC as an Investment adVisor, may give adVice to tts Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Fur1her information on any security mentioned herein IS available on request

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Tabell’s Market Letter – October 27, 1989

Tabell’s Market Letter – October 27, 1989

Tabell's Market Letter - October 27, 1989
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' TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 1609) 987-2300 October 27. 1989 If the now-infamous market of Friday the 13th constituted a mini-October 19. 1987 (and the Mondayrecovev, a mfnl-()ctooer ZO)7then what took place-tfifsTuesaay ()Qul!rfe termed a mini-January 23. 1987. On that day. for those who have forgotten. the Dow was up 64 points around 2 o'clock. down 50 an hour later. up 10. and finally down 44. Tuesday thus constituted a microcosm. the DJIA having been minus 85 points shortly after 10 30. down only 32 at 11 o'clock. then. after losing about half this recovery. spurting to plus territory shortly before the close. All this provided reams of media COpy. There have been few market stories over the past couple of weeks which have not contained the words program trading somewhere In the vicinity of the lead paragraph. It was easy for the press to find qUotable comments on this newly controversial issue, and most of them then tended to come down at one or the other polar extreme. The traditionalists' comments tended toward the apocalyptic, mixed with expressions of longing for a return to the good old 1950's. when the only things traded in Chicago were grown on farms. Remarks by the new era's apologists took a pious tone. with current academic buzzwords such as market liquidity and risk transfer being bandied about. A market technician is. after all. supposed to know something about markets. and. since the entire financial community has. by now, gotten into this act, we modestly add our own two cents' worth. The key word in the paragraph above is. it seems to us. market. In the perfect market we all learned about in Economics 1. lower prices tend to attract buying and diminish selling, and higher prices produce the reverse effect. Such. of course. is not always the case. as technicians implicitly discovered a century ago. when they first started talking about upside and downside breakouts. It has to be admitted. however. that a market worthy of the name must ultimately conform to the classic rules of supply and demand. To the extent that lower prices attract not buying. but. rather, additional selling, the entire market mechanism breaks down ….-,1….,..,,….,..It.. …. .crtainlyarglJable .tha.t….sucha…..condition'-OOC-Urred–t.w-G . . week8 .. ag-o;–andagam—(n-4uesday' —I… morning. An analogy can perhaps be found in the post-I929 discovery that organized bear raids could, in fact. produce lower prices. The response to this was the uptick rule for short sales. It is worth noting that this particular rule was not the result of Solomonic wisdom on the part of regulatory authorities, but. rather. evolved over nine years. A short-sale rule was first promulgated by the NYSE in 1930. The SEC was not given authority over such sales until 1934. and did not use it until 1938, when an extremely stringent rule was enacted. This rule was modified a year later to roughly its current form. The second point which needs to be made is that blaming program trading (or. correctly. index arbitrage. one form of program trading) for all eXIsting ills may be a bit too facile. It is akin to blaming the man who sees a 50 bill lying on the sidewalk for bending over to pick it up. The aforesaid is not necessarily intended to be a defense of index arbitrage. Any institUtion, if it is to exist, must be able to justify its social utility. and we find ourselves having some difficulty so justifying this particular practice. However. to the extent that a problem exists, the root cause lies in the spreads between futures and what used to be called the market. now demoted to lithe cash market. Paradoxically. it can be theorized that such spreads could be eliminated by either one of two opposing approaches. The first would involve the elimination or effective crippling of derivative markets. and the second would focus on deepening and strengthening those markets so that arbitrage index spreads would have less tendency to appear and disappear more quickly when they did. We are dealing. let it be remembered. with what may simply be a structural flaw in the market mechanism. and such flaws are often solved by purely technical changes. One recalls the trIple witching-hour. which was engendering so much breast-beating a couple of years ago. The simple basIng of settlements on opening rather than closing prices effectively eliminated the problem. In other cases, incremental experimentation and ongoing debate were necessary, as exemplified by the history of' snort.-sale rules in the 1930's. …….. ,- Such experimentation has already begun with the so-called circuit breakers. and these devices mayor may not prove effective in decreasing intra-day volatility. The solution, however, is not likely to be found in ukases promulgated by authorities far removed from the marketplace. just as it is unlikely to be solved by pious incantations suggesting that everything is fine just as it is. More pragmatism and less extremism should. it seems to us. be the order of the day. ANTHONY W. TABELL DELAFIELD. HARVEY. TABELL INC. Dow Jones Industrials 02 00) S & P 500 (1200) Cumulative Index 00/26/89) AWTebh 2594.06 336.75 4797.69 No statement or expression of opinion or any other matler herein contained IS, Of IS to be deemed to be, directly or mdlrecUy, an offer or the sollcitaboo of an offer to buy or sell any security referred to or mentioned The matter IS presented merely lor the convenience 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 herem Any aetlon to be taken by the subScriber should be based on hiS own mvestlgatlon and Information Delaheld, Harvey, Tabeiline ,as a corporation and ItS officers or employees, may now have, or may later take, positions or trades 11'1 respect to any secUrities mentIOned 11'1 thiS or any future Issue, and such posilion may be different from any views now or hereafter expressed m this or any other Issue Delafield, Harvey, Tabelllnc, which IS registered with the SEC as an mvestment adVisor, may give adVice to Its mvestmen! adVISOry and other customers mdependently of any statements made In thiS or In any other Issue Further mforma\lon on any security mentIOned herem IS available on request

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