Tabell’s Market Letter – June 08, 1990

TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 -.- June 8, 1990 —,Theabilitycof;thema rketto—breakint-o-new-hig-h ter,ritor-y-;u g gests, as;we -havenoted-Inthe.-,-,..-o-Irl-.. past couple of letters, the possibIlity of further short-term strength. The timing of this breakout is interesting since we are about to enter the July-August period of the summer rally. We are, therefore, reproducing below the customary table, covering 93 years of market history since the Dow was first computed in 1897. One Month Periods (1897-1989) Two Month Periods (18-97-1989 ) End Month Aovances Declines Average Chg Aovances Declines Average Chg. January 59 33 1.16 Februa ry 44 48 -0.29 March 55 38 0.70 Apll 51 42 0.91 May 46 47 -0.33 June 48 45 0.67 July 57 36 1. 48 August 62 30 1. 78 September 36 56 -1.28 October 50 42 -0.12 November 55 37 0.69 December 67 26 1. 38 — — —– TOTAL 630 480 0.56 60 32 53 39 44 49 54 39 49 44 47 46 57 36 62 30 54 38 40 52 54 38 64 29 — — 638 472 2.55 0.88 0.33 1. 67 0.69 0.30 2.15 3.53 0.44 -1. 35 0.64 1.96 —– 1.15 As the table indicates, of the 1110 months since 1897, 630—or 57—have been advancing '…..,…,J 1- ..–c.m-ontns-. ana481.l -or -43—have snoweaaechnes. -rhus-, -the normal expectatIon -for -any given month – would be 52-53 advances and 39-40 declines. Similar fIgures can be adduced for two-month periods. From the data above, we have been able to extract four patterns of a seasonal nature which seem to be statistically significant. The most significant one is the least known, the tendency toward a market decline in the month of September. Since 57 of all months since 1897 have been rising ones, the expectation would be a plurality of advances over declines. However, precisely the opposite is the case for September, which, in 92 years, has produced 56 declines and only 36 advances, with an average drop of 1. 28 percent. The probability of such a pattern being due to chance, a chi-square test tells us, is less than 1 in 1000. The' next most significant pattern has been the year-end rally, illustrated by 67 rising Decembers in 93 years. Our readers know that we have published an annual comment on this phenomenon around December or January of each year. Another seasonal manifestation, which we have demonstrated based on data since 1926, although we have no idea of the reason therefore, has been the fact that the direction in Which the market moves in November has appeared to be a moderately successful predictor of the market's direction for the following year. Of the four seasonal phenomena, the least significant has been the summer rally, which is due to be analyzed at this juncture. As the table shows, the 57 advances and 36 declines for July are marginally better than one would expect. August shows an even greater aberration. The percentage advances for July and August, along with that for the two-month period ending in August, are the largest figures in the table, although December-January performance is close. Despite these figures, standard tests of statistical significance suggest that the summer rally is a less reliable phenomenon than the others noted above. It has been even less reliable recently, especially in July, with five of the eight Julys since 1982 having been down months. Last year all four of the seasonal phenomena asserted themselves. July and August were both up months with July posting a huge 9.04 advance. September was one of only four down months during … – tIle year and the- ie'a'r-end rally,' although it began late, took place on schedule. Moreover, the Dow moved up in November 1989, thus forecasting the mid-1990 strength. There seems. incidentally. to have emerged in recent years a brand new tendency—the occurrence of lmportant market turning points during the summer months. Major market bottoms took place on August 12, 1982 and July 24, 1984. In the opposite direction, the top leading to the 1983 – 1984 decline began to form during the summer of 1983 and, of course, the major high for the Dow, preceding the 1987 crash, occurred on August 25, 1987. The October-December, 1987 low was a return to the normal pattern of fall reversals, however. ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. AWT ebh Dow Jones Industrials (12 00) 2887.14 S & P 500 (1200) 361.48 Cumulative Index (617190) 5185.40 No statement or expression 01 opinion or any other matter herem contained IS, or IS to be deemedto be, directly or Indirectly, an otler orthe sollcltallon of an otler 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 mformabon 10 be rehable, we In no way represent or guarantee the accuracy thereof no! of the statements made herem Any aclJon to be laken by the subscnber should be based on hiS own Investigation and information Delafield, Harvey, Tabellinc , as a corporation and ItS officers or employees may now have, or may later take, positions or trades m respect to any seCUrities mentioned In thiS or any future Issue, and such posl\lon may be dlNerenl from 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 lIS Investment adVISOry and other customers mdependently of any statements made In thiS or In any other Issue Further Information on any security menlloned herem IS available on request