Tabell’s Market Letter – November 03, 1989

TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALER, INC (609) 987-2300 November 3, 1989 In the uncertain business of forecasting the stock market, refreshing elements of certainty occasionally presenC themserves.It-was. – for example ,- possibleonOctoSef' 9 71ess than a moriffi'a'g-o-,-'-' to Bay that we were still in a major bull market, the Dow on that day having posted a new high in its 60 rise from October 19, 1987. Just four days later, this certainty had evaporated. By that time, the DJIA had retreated alost 8, the largest fall in over a year, with the vast bulk of the decline occurring on the single day, FrIday the 13th. The low reached on that day, 2569.26, has turned out to be the low so far. Although uncertainty was introduced with the market retreat, October 9 still remains a reference point. That date, quite simply, will eIther come to be known as the high of a 1987-1989 bull market or it will not. Our readers are aware that we have taken the latter position. We maintain this position at the moment despite obvious changes in the market climate. Breadth has been abysmal since early September, at which point the Transportation Average, recently 22 under its high. began its own mini-bear market. Over the past two months, the inspection of individual stock patterns has revealed an increasing number of uptrends being destroyed. The amount of distribution which has occurred though, does not yet seem to be of bear-market proportions, and we are, in addition, relying on the historical fact that major tops generally have taken a fairly long time to form. Start Date Jul 31 23 Nov 13 29 Jul 8 32 Mar 31 38 Apr28A2 Jun 13 49 Sep 14 53 Oct 22 57 Jun 26 62 Oct 7 66 May 26 70 Dec 6 74 Feb 28 78 Aug 12 82 Jul 24 84 Oct 19 87 Start DJIA 86.91 198.69 41.22 98.95 9.2.9.2 161.60 255.49 419.79 535.76 744.32 631.16 577.60 742.12 776.92 1086.57 1738.74 High No. of Reached Ultimate Months 2 Yrs Later High Date Later 136.50 381.17 Sep 3 29 74 294.07 294.07 Apr 7 30 – 19 110.74 194.40 Mar 10 37 32 158.41 158.41 Nov 12 38 – 16 L40.9112.50y946 25 263.13 293.79 Jan 5 53 19 482.90 521.05 Apr 6 56 6 678.10 734.91 Dec 13 61 26 830.99 985.15 Feb 9 66 19 956.68 985.21 Dec 3 68 2 971. 25 1051. 70 Jan 11 73 7 1014.79 1014.79 Sep 21 76 – 3 907.74 1024.05 Apr 27 81 14 1287.20 1287.20 Nov 29 83 – 8 1909.03 2722.42 Aug 25 87 13 2791.41 of Move ComEleted 17 100 45 100 40 77 86 82 66 88 81 100 59 100 51 Change From 2 Yr High 179 75 50 12 8 9 20 3 9 13 43 The above table is a simple-minded, yet instructive, illustration. It lists the 15 bull markets which have occurred since the 1920's, with their start date and the Dow level on that date shown in the first two columns. The third column is the crucial one. It shows the highest point which was reached up to the second anniversary of the bull-market start, the peak analogous to the 2791.41 level which was the high point of the period October 19, 1987 – October 19, 1989. The table goes on to show the ultimate high for the bull market and the date on which that high was attained. The point of the exercise is that, in 11 of the 15 cases, that high occurred after the two-year anniversary. as shown in the next column. which gives the number of months lag on the ,high date. The next two figures show the percentage of the total move that had been completed by each bull market's second anniversary and the percentage advance from the two-year high to the ultimate high. The good news in the table, of course, is that most bull markets tend to keep on advancing well beyond their two-year-high point. The badnews'isthat;- since WotldWar II at'least-tneseadv-ances have not tended to be very great. The last bull market, 1984-1987, is an exception to this rule, having completed only half its Ultimate advance in the first two years and. at its peak, having moved 43 above its two-year high. However, all the other bull markets since 1949 completed a major portion of their total rise in the first two years, and in most cases, the upside potential remaining at that time was rather small. Thus, while it makes sense at the moment to look for a new hlgh. it would be unrealistic to expect that high to be much above the almost-2800 peak already attained. This sort of scenario appears consistent with individual stock patterns at the moment. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials 02 00) S & P 500 (1200) Cumulative Index 01/2/89) 2638.11 338.44 4779.15 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 orthe solicitation 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 of the statements made herein Any action to be taken by the subscnber should be based on hiS own Investigation and Information Delafield, Harvey, Tabel! Inc., as a corporation and Its officers 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 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 Issue Further Information on any securrty mentioned herein IS avaIlable on request