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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEM8ER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 609) 987-2300 July 20, 1990 Wh-,,inthi.!'SRa9JLOyerthe'years, consistently complained about the media's fascination with round numbers. 'We were thusPreparedfor- an OlitbursCof Iiype as tfieDow liit 30000'–a,,'-' – extra-special round number, since it ends in three zeros rather than the usual two. The expected fireworks, however, turned out to be a fizzle, as the market, not surprisingly it turns out, indulged in some rather bizarre behavior. As a preliminary to this discussion, it is necessary to explain the various figures generated by the computation of a market average each day. There is, of course, the close, and there are also available intra-day high and low figures. These statistics, it should be noted, are arrived at by taking the daily highs and lows of each of the average's components and are thus purely theoretical, since those highs and lows never occur at the same time. More recently, with advanced monitoring equipment, tick-by-tick figures for the daily high and low are available, but the historical record for these is lacking. In any case, the Dow, which had moved ahead some 37 pOints on July 12, to 2970, extended that rally on Friday morning and, at around 2 p.m., first penetrated the 3000 level. It pulled back sharply at the close, however, to finish at 2980, having, in the process, achieved the first intra-day peak above 3000. Starting Monday morning, a solid upward progression began, and the magic mark was again breached by noon, with a level around 3008 attained at 3 o'clock. A sell-off ensued, however, and a last-minute rally fell short, producing a close of 2999.75, to date, at least, the average's highest closing figure. On Tuesday, the market moved ahead early and the intra-day figure of 3024.26 on that day stands, so far, as the record. There followed a pull-back and another last-minute rally which aborted in the final five minutes, leaving the Dow unchanged from the previous day, one-quarter of a point below 3000. Another approach was made late Thursday and, as this is written, a further flirtation with 3000 is taking place. It occurred to us, as all of this was going on, that we recalled similar hesitations at round-number levels in the past. Accordingly, we undertook a semi-recreational search of our data … – b ank–toobserve4he–Dow' s-4enavior-'9.s…..it-d'-irst–attained-each-even- h u ndI!edlevel …,B tarting .Lin 1946 .–li- (It had, of course, been as high as 386 in the 1920's, but we started our investigation post-World War ll.) It turned out that a fairly long gap between the aVerage's first attaining such a figure on intra-day basis and finally managing to close there was a not-uncommon occurrence. The following table lists the date of the first intra-day and the first closing high above each even-hundred level to date. In only three cases, in 1946 at 200, 1956 at 500, and 1987 at 2100, did both a high and closing penetration take place on the same day. Level First Rlgh First Close Level First High First Close Level Flrst Hlgh Fust Close 200 300 400 500 600 700 800 900 1000 1100 JAN 11 1946 MAR 51954 DEX 21 1954 MAR 12 1956 JAN 21 1959 APR 11 1961 ml 17 1964 JlIN 19 1965 JlIN IB 1966 JAN 12 1983 JAN 11 1946 MAR 11 1954 00 29 1954 MAR 12 1956 ml 20 1959 171961 ml 28 1964 Jl\N 28 1965 10114 1972 ml 24 1983 1200 1300 1400 1500 1600 1700 1800 1900 2000 2100 Am 2119B3 JAN 30 19B5 101 5 19B5 00 5 19B5 FEll 3 19B6 FEll 21 1986 MAR 18 1986 Jal 25 1986 JAN 7 1987 JAN 19 19B7 Am 26 19B3 20 19B5 101 6 19B5 00 11 19B5 FEll 6 1986 FEll 27 19B6 MAR 20 1986 JUL 1 1986 JAN B 19B7 JAN 19 19B7 2200 2300 2400 2500 2600 2700 2800 2900 3000 Jl\N 23 19B7 MAR 11 19B7 Am 3 19B7 JUL 15 19B7 1\00 6 1987 1\00 7 19B9 err 61989 30 1990 JUL 13 1990 ml 5 19B7 MAR 20 19B7 Am 6 19B7 JUL 17 19B7 1\00 10 19B7 1\00 10 1989 Jl\N 21990 JW 1 1990 11717177117 The most notable case of such a hesitation, of course. accompanied the Dow's first dalliance with the 1000 level. This event was, at the time, invested with an incredible amount of social significance. There was even a Broadway musical entitled, How Now. Dow Jones in which, as we recall, the hero could not wed the heroine until the 1000 level was attained, an event which duly took place in the grand finale. The intra-day figure for the DJIA was above 1000 on both January 18-19 and February 9-10, 1966. On each of these occasions, however, it failed to close above 1000, and the latter occasion proved to be the high of the 1962-1966 bull market. It was not until November 14, 1972 that the index was first able to actually close above the 1000 level, a gap of 6 1/2 years between the intra-day penetration and the closing one.. This, of course. is a consummation devoutly not to be wished for in the present case. There were other notable hesitations. As the table shows, an intra-day peak of 1300 was first attained in January, 1985, and a corresponding closing figure not until May. However, the Dow had been at the 1296 intra-day level as early as November 30, 1983, and the gap between that date and the first 1300-close was a year and a half. Now we are not sure any of the above has any significance, and we are certainly making no such claim for it here. Markets, however. result from the collective action of participants, and those participants are human beings with a normal fascination for easily remembered round numbers. In this light, the behavior of the market as such numbers have been attained seems moderately interesting. ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL INC. Dow Jones Industrials 02 00) 2999.01 S & P 500 (12 00) 365.60 Cumulative Index (07/19/90) 5164.53 AWTebh No statement or expresslC1\ of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or Indirectly, an offer or the Sohcltatlon of an offer to buy or sell any security referred to or mentioned The matter IS presented merely for the convenience of the subscnber While we beheve the sources of our Information to be rehable. we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subSCriber should be based on hiS own Investigation and information Delafield, Harvey. Tabel1 Inc, as a corporatIOn and Its officers or employees, may now have, or may later take, posrfrons or trades Ifl respect to any securitIeS mentioned In thiS or any luture Issue, and such POSlllOfl may be different Irom any views now or hereafter expressed In thiS or any other Issue Delalleld, Harvey, Tabe!llnc, which IS registered With the SEC as an Investment adVisor, may give adVice to Its Investment adVISOry and other customers Independently 01 any statements made In thiS or In any other ISsue Further Information on any security mentioned herem IS available on request ….