Tabell’s Market Letter – May 18, 1990

Tabell’s Market Letter – May 18, 1990

Tabell's Market Letter - May 18, 1990
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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 May 18. 1990 Please do something—anything!. Anthony W. Tabell. May 11. 1990. 12 noon. …..1- – -l'his,statement-wriHefl…last-'week-has-. .nq' fro; 'H' .1. market for most of the year …. As we know, the Dow Jones Industrial Average 'reached a new all-time high of 2810.15 on the first trading day of this year and was followed by a correction of 9.50 in the short period of 20 trading days. reaching a low of 2543.24 on January 30. Since that low. the DJIA had, been contained within this trading range. Contained, that is, until last Friday afternoon when, in fact, the market began to do somethinglt The enthusiasm of bond prices surging and interest rates falling for most of the past two weeks. suggesting the economy and/or inflation is not as strong as it might be. spilled over into the stock market. and it took flight. The DJIA closed up 63.07 points on increased volume of 234 million shares. This was followed on Monday by an advance of 19.95 points to a new. all-time high in the Dow of 2821.53. breaking out on the upside of the consolidation area that has contained the market since the first part of the year. Utilizing point-and-figure analysis. it is possible to project an upside objective on the DJIA of 3100. or approximately 10. Both the New York Stock Exchange Industrials and the Standard & Poor's Industrials reflect similar percentage moves. Having waited for approximately four months for this event to occur, however, we should not assume that. by breaking out on the upside from this trading area. all of our problems are solved. What. in fact. has changed' Short-term volume and breadth have shown improvement. but it is still too early to justify a major transformation in these series. Another problem that continues to be with us is the narrowness of the recent leadership. While the DJIA has gone on to a new. all-time high. the Value Line Composite is down 13.2 from its October 9 high of 278.98 and 6.38 since the first of the year. reflecting poor relative strength. 1 Year SaP 500 Return – 1 Year Value lIne Return An interesting way to show this disparity is to compare the Standard & Poor's 500. a capital-weighted Bverage.of.500.stocks. to the Value.Line Composite. an unweighted !'verage of 1700 stocks. The chart above shows the12-mOlith return of the S & P 500 minus the 12-month return of the Value Line Composite. In simplest terms, when the difference in returns is above the zero line. the S & P 500 is acting relatively better than the Value Line Composite. What is interesting to observe is that since 1984 there has been a significant shift in return of stocks. There are a number of possible reasons for the concentration of positive returns in the S 8& P 500—institutionalization of the market. index funds. and, more recently, program trading. Regardless of the reasons, there still exists a concentration in large-capitalization, high- quality stocks (S & P 500) versus the broader sector of the stock market (Value Line). Has there been a major fundamental change in the stock market and will this continue. or will the broader sector of the stock market begin to again participate The answer will help us determine the importance of recent improved market action. ROBERT J. SIMPKINS. JR. DELAFIELD. HARVEY. TAB ELL INC. Dow Jones Industrials (1200) 2816.44 S & P 500 (1200) 352.84 Cumulative Index (5/17/90) 4877.75 No statementor expression of opinion or any other matter herein contained IS, or IS to be deemed 10 be, dlrectty or rndrrectly, an olferorthe soltcrtabon 01 an offer to buy or selt any secllnty referred to or menlloned The matter rs presented merely for the convenience of the subscnOOr Whrle we beheve the SOUfces of our rnformabon to be reltable, we In no way represent Of guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subscnber shOUld be based On hrs own tfwestrgatlon and information Delafreld, Harvey, TaOOIt Inc, as a corporatron and liS offrcers Or employees, may now have, or may tater take, pOSllrons or trades rn respect to any secuntles mentroned In thrs or any future rssue, and such posrtlon may be different from any VIews now or hereafter expressed In thrs or any other Issue Delafreld, Hatvey, Tabelllflc , whrch rs regrstered wtfh the SEC as an Inveslmefll 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 securrty menboned herein IS available on request

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