Tabell’s Market Letter – March 30, 1990

Tabell’s Market Letter – March 30, 1990

Tabell's Market Letter - March 30, 1990
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 085435209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 9872300 March 30, 1990 There exists a body of common knowledge regarding the current bull market. One item therein is .- that-itrla-seeri-a'miirk-et of'blgstock1i-ratner-than-little,-large caps rathertJfan'smallap'i, – , , -,. listed stocks rather than OTC issues. Like much common knowledge, this bit is essentially true, but Tthhee trutathbleis aatbitrimghotre ctroamcpelsicattehde. Dow, Date DJIA S&P500 NASDAQ Val. Line S & P 500, NASDAQ Industrials, and Value Line Composite for a number of key dates during the 1987-1990 bull market. Using the common method of equating each average to 100 on the base date of October 19, 1987, it shows clearly the long-term superior performance for the Dow and S &.p, both of WhICh were, at Oct 19 1987 gDec 4 1987 Ju1 51988 Oct 91989 Nov 6 1989 Jan 2 1990 100.00 101.61 124.15 g 160.54 148.51 161.62 100.00 99.59 122.67 1i266.16 147.93 159.98 100.00 78.58 111.74 1104.60 116.88 122.72 100.00 85.52 113.80 1i12,42 120.10 123.73 Wednesday's price, up over 50 vs. a 22 rise Jan 30 1990 146.27 143.65 111.09 for the NASDAQ and 16 for the Value Line. Mar 28 1990 157.80 152.11 121.99 110.85 115.65 A closer look at the table, however, reveals an interesting fact. While the better-known averages simply tested their October levels at their December lows, the other two averages suffered drops of bear-market proportions in the two months following October 19. Measured from their highs in August, the two averages were down close to 40. The simple exercise of changing the base date Date DJIA S&P 500 NASDAQ Val.Llne in the table to December 4, 1987, results in the ———- ——- ——- ——- ——– comparison at the left. It shows that during the JDue1c 54 11998887 112020..1080 1102031070 114020..2000 113030..0070 early months of the bull market, the two averages oct 21 1988 123.59 126.68 133.12 131.45 of lesser-known stocks actually outperformed by Nov 16 1988 115.39 117.82 124.03 123.52 fairly significant amounts. The result of this NOocvt 69 . l A n 2 11996899 1990 114568..1050 159.. o6 11t.646Q60….S6…84.6.3–11146-582-..67642.18–J11454-440…. 046.364hoauvtepea.rcfto.rumallayncp.eroisY.t.lh'a-te.dthaetNo.AuStDtAheQsaImend.uasmtoruinatl s o f . – , , – , I T- – — Jan 30-1990–10.9S….—14-4.24–141.38—–129.61appreciationas…The…….Dowaftheir recent .. prlce, 8n-d—– —— Mar 28 1990 155.30 152.73 155.25 135.23 the Value Line, while trailing, is not that far behind. In mid-1988, another pattern of large-stock superiority began to develop. The two major averages went on to reach new highs in October 1988, whereas the other two failed to equal their summer tops 4 All the averages were down about the same percentage amount in October-November, but then, when the current phase of the bull market began in November 1988, a pattern of better results on the upside for the large-capitalization stocks began to emerge. Trihgehtr,esuwlhtsichof sthhiifstsarteheshobwasne indatthee ftoarbwlearadt Date DJIA S&P500 NASDAQ val.Line again. Both the Dow and S & P 500 have done Nov 16 1988 100.00 100.00 100.00 100,00 better on the upside, and yet another pattern Oct 9 1989 136.93 136.38 131.1l 124.72 has emerged, that of the NASDAQ Industrials outperforming the Value Line. This pattern has continued. Measured against its January 30 low, the Dow was, this week, up 7.88 Nov 6 1989 Jan 2 1g99g0 126.67 in 134.59 126.07 g 129.63 119.93 g 125.17 l13.68 l17.12 104.93 109.47 vs. 9.81 for the NASDAQ, and 4.33 for the Value Line. It is interesting that the reason for the better listed-stock action since late 1988 has essentially been due to larger rises on rallies. The percentage declines during short-term downswings have been about the same for all four averages. A couple of conclusions may be drawn. The first is that the recent outperformance of the over-the-counter averages vis-a-vis the Value Line may be. to a degree, another instance of the large-stock effect. The NASDAQ average, while it is, composed of a huge number of stocks, is capital weighted and. therefore, tends to reflect the action of larger issues. The Value Line average is. by contrast, computed geometrically and. therefore, gives equaL.weight to each – issue. Another conclusion is that action has been more or less normal, from a technical point of view. If one envisions the bear market as having continued to December 1987, we witnessed a typical phenomenon of secondary issues collapsing at the end of the downswing and then producing superior recovery as the next bull market began. We are now witnessing a normal, if protracted, late bull-market stage in which larger stocks normally outperform smaller ones. The final question, of course, centers around when this pattern will change. There appears. from a technical point of view. to be no indication of its doing so immediately. Based on the historical record, it would be normal for new leadership not to emerge until a cycle downswing has been completed and the next bull market begins. Dow Jones Industrials (12 00) S & P 500 (12 00) Cumulative Index (3/29/90) AWTebh 2709.68 338.88 4868.02 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. 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 selt any security referred to Of mentioned The matter IS presented merely for the convenience of the subscriber While we beheve the sources of our Informallon to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any aCllOn to be taken by the subSCriber should be based on hiS own Investigation and Information Dela/leld, Harvey, Tabe!! Inc, 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 Mure Issue, and such poSition may be different from any views now or hereafter expressed In this Of any other Issue Delafield, Harvey, TabeUlnc, which IS registered With the SEC as an Investment adVisor, may give adVIce 10 Its Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further Information on any security mentIOned herein IS available on request

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