Tabell’s Market Letter – February 09, 1990

– — – ———– TABUELL'S MaRKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (6091 987-2300 February 9, 1990 I—-,-',——C'''——–'-'-'''''''–'''''-'— I- It occurs to us that, on our comment over recent months. we are especially vulnerable to the charge of hedging—an art which, we must admit, over 35 years of penning market letters, we have learned something about. One of the oldest hedging rules is. If you give 'em a number, don't give 'em a time, and if you give 'em a time, don't give 'em a number. It is, in other words. permissible to forecast the Dow's reaching, say, 5,000. if you do not specify precisely when this happy event is going to occur. Likewise, one can opine that the market will be higher at year-end, but saying just how much higher constitutes sticking one's neck out. We have, in this space, been bandying about two numbers (without giving a time) for the Dow. These numbers are, first, an upside objective of 3400 and, secondly, a downside target of 2200, It may well occur to our readers that this spread is a contender for the all-time, world-class, championship hedge. We had, therefore, better explain ourselves a little further. The first figure is derived, quite simply, from the 50-point-unit chart on the Dow shown at left. A simple measurement of the 1987-1989 accumulation area across the 2100 line, standard practice wlth P & F charts, yields, as we have shown. a 3400 target. However, when we referred to this objective most recently, in our year-end forecast. we noted that. it is quite possible that the market top out before this objective is attained and, a bear market, reach it on the little formation on the side of the chart and the question of whether it is or is not a distributional top. For a closer analysis, let us shift both the scale and subject matter, looking at the two-point unit chart of the S & P 500 below. It, unfortunately, more so than the Dow, appears to be a completed top, with a downside breakout having duly taken place late last month. The downtrlde objective is 282, some 15 below current prices, as the Dow's comparable 2200 objective Is about the same percentage below its present level. The Dow, however, as we noted last week, has not yet posted a downside breakout. For the short term, both 340 averages have small bases, with upside targets of 340 for the S & P and 2700 for the Dow, at which levels 3'lo they would both run into fairly massive overhead '32D supply. Their behavior, as those figures are attained should afford some indication as to whether the market can rebase and attempt new highs, or 310 whether the distributional-top theory is the correct 300 one. A decline to 2200, it must be noted, although a drop of cycle-bear-market scale, would simply 2.90 constitute a return to support While the spread between 3400 and 2200 is huge, it remains necessary, in an imperfect world, to keep both numbers in mind when trying to formulate a market scenario. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) S & P 500 (12 00) Cumulative Index (02/08/90) AWTebh 2643.69 332.58 4794.66 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 offerlo buy or sell any security referred to or mentioned The matter IS presented merely for the convenience of the subSCriber While we believe Ihe sources of our Information to be reliable, we In no way represent or guaranlee the accuracy thereof nor of the statements made herein Any acMn to be taken by the subSCriber should be based on hiS own investigation and Information Delafield, Harvey, Tabel! Inc. as a corporation and Its afllcers or employees, may now have, or may later lake, pOSitions or trades In respect 10 any secuntles mentioned In thiS or any future Issue, Bnd 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 Informa\!on on any secunty menliOned herein IS available on request