Tabell’s Market Letter – March 16, 1990

TABELL'S MARKET LETTER 600 ALEXANDER ROAD. CN 5209, PRINCETON, NEW JERSEY 08543,5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (6091 987,2300 March 16. 1990 There has been 8 fair amount of comment, of late. on the subject of stock-market volume, much of it trtggll,recl.!)ythe faQ.t…!h!!L'22londay only 114.8 million shares changed hands on the NYSE. This was the n, – ''iov,.est figure for '19lHJ todate;-but it also conshtuteil' a 'record; fora'sHil longer 'perioo. 'InspectIon' reveals that the ten most recent days which saw lower volume were all associated with holidays. For non-holiday trading. Monday's figure was the lowest since September. 1988 and. with the exception of ten days in summer that year. the lowest of the entire bull market. DOW JONES INDUSTRIAL AVERAGE ,i ml m m m m 01to 0 0 0 0 mCOCmOOolOolCII Z…JOQ…!- . w u …, -, 1 (f) 0 oz u lLI 0 zmlIJa …., '- L As the chart above shows, the market has had to contend, of late, not only with deteriorating breadth, but with weakening volume.. The breadth weakness since August, 8 phenomenon to which we have repeatedly drawn attention in this space, shows up clearly in the daily advance/decline line, the center line on the chart. January's breadth high was nowhere close to the peaks of early summer, and breadth had, prior to recent strength, moved to a new low early this month. This is in direct contrast to the series of new highs on the DJI A. the upper line on the chart. The Bubject of this piece, however. is volume. It is our practice to smooth this figure with a 100-day moving average. which is shown as the lower, thicker line on the chart. For the 100 days ended December 22. 1987. volume averaged 205 million shares. an all-time record. As the chart shows. it dropped off to a level around 142 million shares in early 1989, and. after recovering somewhat, has posted a new low at 158.2 million shares yesterday. , This record is interesting in light of the longer-term pattern. Through the middle 1960's. volume tended to be a fairly reliable leading' indicator. It generally rose ,du-nngthe early .stages ,of ,bull markets and then peaked. with as much as a two-year lag, prior to the averages' reaching their highs. This lead-time evaporated almost to nothingness in the middle 1960's, and, since that time. volume has tended to top out around the same as the major market indices. The current upswing. therefore, may be the only one on record during which volume has topped out almost precisely at the bull-market start and continued to decline fairly steadily throughout a 62 major-cycle rise. In light of this history. it is hard to know how to construe the above phenomenon. but it is hard to call it bullish. It has tended to be a technical rule of thumb that falling prices can often occur on diminished volume but that sustained rises usually require expanding activity on the upside. Such activity in the current bull market. though. has been conspicuous by its absence. ANTHONY W. TABELL DELAFIELD. HARVEY. TABELL INC. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (3/15/90) AWTebh 2717.34 340.53 4872.32 No statement or eJ(presslon of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or indirectly, an offer or the solicrtatlon of an offer to buy or sell any securrty 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 represeT\l or guarantee the accuracy thereof nor 01 the statements made herein Any action to be laken bylhe subSCriber should be based on hiS own InvestigatIon and Information Delafield, Harvey, Tabelllnc, as a corporallon and Jts officers or employees, may now have, or maylaler lake, pOSJIIOflS or trades In respect 10 any secun/Jes menllOned 111 Ihls or any future Issue, and such pDSJlJOfI may be different/rom any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabell Inc , which IS registered With the SEC as an Investment adVisor, may gIVe advice to Its Investment adVISOry and other customers mdependently of any statements made In thIS or In any other Issue Further InformatIOn on any security mentioned hereIn IS available on request