Tabell’s Market Letter – December 28, 1990

————————– ———– ———— TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 1609) 987-2300 , . D,ecember 8, 1990 For some years now, we have studieu'tlle famlliar seasonal tendency of the stock market-to stage a year-end rally, and It has been the custom of tllis letter to point out some of the conclusions that can be derived from a study of this phenomenon. Since 1897, wilen the Dow Jones Industrial Average was first computed, a rally, however small. Ilas begun In December and continued Into the new year In 91 of 93 cases. the two exceptions occurring In the mid 1970's. The following facts about the year-end rally may be noted. 1. The year-end rally often Ilas been of great magnitude. occasionally continuing througll tile entire sUbsequent year without a 5 correction being recorded. It has frequently continued. with only minor Interruptions. for as long as six months Into the new year. In many cases. the rally continued into February, March or beyond. However, on otller occasions. it Ilas been of only a few day's duration. reaching a top extremely early. This was especially true in 1990, with tile rally peaking on tile very first day of the year. In the bear-market years of 1960. 1970, 1973. 1974. 1981. and 1982, the rally reached a peak by the first week In January, and. as noted above, tile 1976 and 1977 year-end rallies did not carry Into January at all, the only two In market Ilistory so to fall. 2. There has been a persistent tendency for tile rally to begin early In years when the market has been up. and late In years when the market has been down. In recent upward years, 1967, 1975, 1979, 1980, and 1985 are examples. the rally commenced from early December. In recent downward years, 1962. 1966, 1969. 1977, and 1981, the rally began late In tile year. 1986 was an exception. an upward year where the year-end rally started on December 31. The 1987-88 year-end rally started on December 4. (1987 was an up year), and the 1988-89 rally saw its December Iowan the second day of tile month-.-This years rally proved an ex.cep!ion in that all of Decemberwas an up mOnth despite–1990's being -Ii -bear markeCyear.- –;- – – ,—- -. 3. The Important thing to watch in connection with the market action in the early months of the new year Is the December low. This low has been broken In 53 years out of the past 90. However. in 31 of these 53 cases. it was broken in January and February. For example. in 1970. 1973. 1977. 1978. 1981, 1982. and this year. the December low was broken In early January. Since 1937. it has never been broken later than mid-March with four exceptions 1965. 1974. 1981. and. of course. 1987. Thus. if the market is able to hold above its December low for the first 2 1/2 months of the year. chances become good that this low wlll not be penetrated. 4. In years when the December low has been broken. the subsequent trend has been downward two-thirds of the time. 1962. 1966. 1969. 1973. 1974. 1977. 1984. are typical cases. 1965. 1978. 1980. and. most recently. 1982 are exceptions. This year conformed to the rule. 5. The magnitude of the rally Is an important clue as to the years market trend. For example. an advance of 10 or more from the December low has been followed by an upward or neutral market in 41 of the 47 years that such an advance has occurred. An advance of less than 10 from the December low before an identifiable correction takes place has been followed by a downward market in 31 of 43 years. From 1985 to 1989. the year-end rally has been well in excess of 10. In the 1990 bear-market year. it was less. 6. The length of time for which the rally continues into the new year Is Important. For example. In 28 years. the rally continued Into March or later. In 24 of these 28 years. the eventual trend was upward. In 1964. 1972. 1975, 1976. 1985. 1986, and 1989. the year-end rally continued into March and In 1961, 1967. 1971. and 1980. into February. This year so far. the advance from the December low of 2565.59 has been less than 3. If the rally extends itself to 10 (approximately 2822) in the early new year, it would be a bullish sign. Likewise. continuation of the advance into February-March would be a positive indication. Dow Jones Industrials (1200) S P 500 (1200) Cumulative Index (12/27/90) AWTjb 2621.29 328.16 4832.28 ANTHONY W. TABELL DELAFIELD, HARVEY. TAB ELL INC. No statement or expreSSion 01 opinion or any ather matter herein contained IS, or IS to be deemed to be, directly or Indirectly, an afferor the soliCitation of an offer ta buy or sell any secUrity referred to or mentioned The matter IS presented merety for the convenience of the subscriber While we beheve the sources of our tnformatlOn 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 shoutd be based on hiS own InvestlgaliOn and Information Delafield, Harvey, Tabelllnc, as a corporation and Its officers or employees, may now have, or may later take, positions ar trades In respect to any seCUrities mentioned In thiS or any future Issue, and such poSition may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabellinc , whIch IS registered With the SEC as en Investment adVisor, may give adVice to ItS IIlvestment adVISOry and other customers IIldependently of any statements made In thIs or In any other Issue Further Informallon on any secUrily menllOned herein IS available on request