Tabell’s Market Letter – July 27, 1990

Tabell’s Market Letter – July 27, 1990

Tabell's Market Letter - July 27, 1990
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U' / B I E n.n. ' S JRl Ct lEV n.1EU'''U'IE 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987 -2300 July 27, 1990 with the Dow's having spent the week bumping against the its failure close above that figure, the DJIA provided us with another round number, a Monday-mornirig decline which, at its worst level, exceeded 100 points. What was unusual about this action was not the extent of the decline, but its suddenness. along with the equally sudden recovery of half the loss on Monday afternoon. We would be tempted to call this volatility were we not assured by the academic community that volatility is only a figment of Qur imagination. As noted above. the extent of the decline was minor. The Dow was down 3.17 over four days and there have been, for the record. 23 larger declines since the bull market began in October, 1987 and 10 larger ones since the onset of its current' phase in November. 1988. The drop will assume importance only to the extent that it is part of a larger pattern. It is probably worthwhile, therefore, to view the recent market 3\0 pattern as it has been manifested on point-and-figure charts. The one at left. a 50-point chart of the Dow should be the favorite of the bulls. It illustrates perfectly the base formed between October. 1987 and fall. 1988. Measured across A-B. the upside objective of that base is 3400. IQOO The existence of this objective, as we have been notmg, has constituted the background for market analysis over the last year and a half. The 50-point chart, however, is too condensed to show the nearer-term picture on the Dow and for right. The chart encompasses action since the October. 1989 break. and its salient feature is the base at A-B. also indicating a higher intermedIate-term upside target at 3100. As can be seen, the recent decline, shown by the arrow on the chart, is insignificant. What is significant is the potential top formation, now 2100 limited to C-D, which, if a breakout were to 1000 take place immediately. would suggest a drop to 2680. a decline of a bit over 10—one of 8XJ intermediate-scale proportions. Pessimists, of course. will note that the pattern could broaden into the familiar head-and-shoulders and, eventually, wind up indicating a much lower objective, one which might move through the massive support at. approximately. the 2800-2600 level. Nothing like this. however. appears in the cards at the moment. The pattern for the S & P 500. shown at left. on a two-point basis. is similar. the A-B base suggesting 388. an upside move similar to one projected for the Dow The interesting difference in the two averages is in the recent IIIIi formation. 'The S &; P made only a marginal new 2'I1I!!!!IIIlIIII!l!!!!I 1 – higli on the June-upswing–;and' the 'formation has EE some of the characteristics of a potential double top. Again. hke the Dow. a downside breakout would bring the S & P mto strong support. the 334 objective being in the middle of the 340-322 support area. It would require an ultimate break of that support to cause major concern. A pattern for potential weakness does. indeed, exist, and Vigilance, as always, will be necessary. Last week's decline. though. did little to alter the basic market picture. ANTHONY W. TAB ELL DELAFIELD. HARVEY. TAB ELL INC. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (7/26/90) AWTebh 2915.10 354.42 4879.06 No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or indirectly, an offeror the solicltallOn 01 an offer to buy or se1l 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 reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any actIon 10 be taken by the subscrIber should be based on hiS own InvestIgation and InformatIon Delafield, Harvey, Tabell Inc, as a corporation and ItS officers or employees, may now have, or may later take, postllons Ot trades In respect to any securtlles menboned In thIS or any future Issue, and such poslilon may be dIfferent Irom any views now or herealter expressed In thiS or any other Issue Delafield, Harvey, Tabellinc , whIch IS regIstered with the SEC as an Investment adVISor, may gIve adVice to ItS Investment adVISOry and other customers Independently of any statements made In this or In any other Issue Further InformatIon on any securtty men1lOned herein IS avaIlable on request

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