Viewing Month: January 1991

Tabell’s Market Letter – January 04, 1991

Tabell’s Market Letter – January 04, 1991

Tabell's Market Letter - January 04, 1991
View Text Version (OCR)

, — TABELL'S MARKET LETTER 600 ALEXANDER ROAD, eN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES,DEALERS, INC (6091987-2300 January 4. Iq91 Based on its record so far at least. 1991 has the potential to be a highly unusual stock-market year. It couldwi!ldup, beingonly thethird.year since .theDowJ onesIndustrial Average was' first compu'ted -in 1897 in which'the traaitional year-end rally fails to carry into January of the following year. The rally began early. which is. in itself. unusual since the market trend for 1990 had been decisively downward. This flies in the face of the historical tendency for the rally to begin late in years when the market had been down. The rally high. reached on December 26. Was 2637.13. Both of the first two days of 1991 were down days. and. at this writing the Dow finds itself some sixty points under that peak As we discussed at length last week. there have been only two instances ince 1897 when th year-end rally failed to carry into January. They were. strangely enough. in consecutive years. 1976-7 and 1977-8 Both these instances took place during the course of the September 1976 – February 1978 bear market. a rather mild affair (the decline was 26.9). in which a fair number of issues performed rather well. Interestingly, the market environment we foresee for. at least the early part. of 1991 is not dissimilar. The dilemma facing the market today can be exemplified by the chart at right, a 5-point- unit point-and-figure chart of the S & P 500. IC one looks only at the index's most recent action, in other words the base formed during the fall of 1990. the outlook is highly encour- aging. That base may be counted from either point E or point F as far as point G, yielding an upside target of 360-375—in other words. a test of the all-time high. There exists some real question, however, as to whether this jnterpre1llioll jlU!1alid9ne,.Fjrst.of alL. '''''' the market finds itself, at the moment, pressing into heavy overhead supply from the top formed during 1989-90 between 365 and 325, identified on the chart at C-D. Not only does this top present a formidable upside obstacle. but its downside potential is significantly below levels already reached. The identification of this area as a top is buttressed by the fact that. at its July high, the 500 had just about reRched the upside target of the 1987 base at A-B. It is necessary to ask, moreover, just where the upside leadership for an extended advance might come from. We recently took the opportunity to examine the percentage change of each of the S & P 500 components from their autumn-1990 lows to whatever highs were subsequently reached. The advance in the 500 itself, of course, was only 12.2. Individual issues managed to advance. in four cases more than 50. and some 242 stocks managed to post a greater-than-20 advance. Interestingly. a large number of these issues were in the financial area. and of the 58 S & P components that fall into this category, 49 rose by 20 or more. This is normal technical action. Finance stocks were among the leaders on the downside during the 1990 price collapse, and it is typical that such issues should find themself achieving the sharpest bounce on the first noticeable rally. We must hasten to add, however. that this action most assuredly does not mean that these stocks have the potential to be upside leaders. Before recovery can be foreseen, a protracted period of basebuilding must take place, and most finance stocks, having reached short-term objectives, are probably now trading around the upper limit of where those bases will be formed. ' In contrast to the banks and insurers. there exists another large group of issues whose market action has been diametrically opposite. These are the usual suspect. institutional favorites possessing impeccable growth records. Such stocks were generally resistant to the 1990 decline. Philip MorriS, as good an archetype as any, feU only 13 between July and October. and was recently trading above its early October high. one of only 50 stocks in the S & P 500 to have acheived that feat. The technical pattern indeed suggests that it could sell at still higher levels, along with a host of similar well-known names in the food. consumer, and health-care fields. We are, however, inclined to question whether these issues have the potential to lead a dynamic bull market from current levels. For the time being. therefore, we are inclined to maintain the pessimistic, short-to-intermediate-term outlook discussed in our final 1990 letters. As we noted at that time, the further weakness we anticipate could well provide a major buying opportunity. Dm. Jones Industrials (1200) S & P 500 (1200) Cumulative Index 0/3/90 AWTjb 2564.10 320.27 4539.15 ANTHONY W. T4.BELL DELAFIELD, HARVEY, TABELL INC. No statement or e)(preSSlon of Opinion or any other matter herein contaIned IS, or IS to be deemed to be, directly or indirectly, an offer or the soliCitatIOn of an offer to buy or sell any secunty 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 herem Any actIOn to be taken by the subscnber should be based on hiS own mvestlgallOn and information Delafield, Harvey, Tabell Inc , as a corporation and rts officers or employees, may now have, or may later take, posilions or Irades In respect to any securrtles menboned In this or any future ISSue, and such posrtlOn may be dlfferenl from any views now or hereafter expressed In thiS or any other ISSue Delafield, Harvey, Tabellinc , which IS registered wrth the SEC as an Investment adVisor, may give adVice to rts Investment adVISOry and other customers Independently of any S1atemenls made In thIS or In any other Issue Fur1her mformahon on any secUrity mentioned herein IS available on request

Download PDF

Tabell’s Market Letter – January 11, 1991

Tabell’s Market Letter – January 11, 1991

Tabell's Market Letter - January 11, 1991
View Text Version (OCR)

TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 609) 987-2300 – -, January II, 1991 These are, Indeed, parlous times. The United States Congress finds Itself debating whether or not we should engage In a war which will, without doubt, produce a saddening total of American casualties. At home, It Is, by now, almost universally agreed that we find ourselves In an economic recession which will Impact, In one way or another, large numbers of U.S. citizens. These are serious matters Indeed. They are sufficiently serious as to require the market technician once more to note that, Important as these events are to all of us, they have no direct effect whatsoever on the stock market. The stock market Is moved, we need to remind ourselves, by buyers and sellers acting in the market place. This is not to say that war or recession are irrelevant. Buy and sell decisions may well be made In response to events on the economic or the Middle Eastern scene. However, the market's response to similar happenings In past history has often been at variance with what one might expect. It Is the technician's job to examine these historical relationships. The market's Initial response to the possibility of war in the Persian Gulf was Indeed a bearish one. On August 1, the day before Saddam Hussein Invaded Kuwait, the Dow was just under 2900, 100 points off its high. It lost 190 points In the next four days and another 300-plus points by mid-October before a rally, which apparently ended at noon on the first trading day of 1991, stemmed the tide. This action cannot be said to be unusual, since the Initial reaction to the prospect of war Is often negative. Following December 7, 1941, the market continued what was, by then, a three-year-old downward trend. Its response to the outbreak of the Korean War was a 13 decline In June 1950. Following the outburst of World War I In Europe, the Stock Exchange was closed for 3 1/'2hecmcinotln;t'hn-su.-a-n-c-e-of-w-a-r-,-'hro-w-e-v-e-r-,-has, for whatever reason, tended to produce rising prices; — April 1942 launched a four-year bull market which continued until after war's end. July 1950 saw the start of an almost-50 rise in stock prices. The starting date of the Vietnam conflict Is a matter of opinion, but it certainly included parts of at least two major bull markets. The underlying reasons for this are not, as some have opined, an Indication of some sort of institutional amorality in financial markets. The thesis that economic activity brought on by war often mitigates against an economic downturn Is undoubtedly closer to the mark, and may Indeed have some applicability In the present case. As far as recession Is concerned, we need once again remind ourselves that the market leads the economy. There have been eight recessions in the Post World War II period. It is interesting that, based on monthly average prices for the Dow, the market was higher in the month of the recession's end than at its beginning in no fewer than four of those eight cases, and that the average change for the DJIA during these recessions was 1.8. The table at right shows, for these eight recessions, their beginning and end dates, the associated stock market low, and, most importantly, the relationship of that low to the Recession stock Months Months Market After After Low peak Trough eventual peak and trough. This relationship is one of the reasons for this letter's current short term pessimism. It is likely that the recession began (Remember that it has not yet been officially proclaimed) sometime during the fourth quarter of 1990 The fact that stockmarket lows have tended to take place well after a recession's onset tends to mitigate. we think, Nov 4S-0ct 49 Jun 49 Jul 52-May 54 Sep 53 Aug 57-Apr 5S oct 57 Apr 60-Feb 61 Oct 60 Dec 69-Nov 70 May 70 Nov 73-Msr 75 Dec 74 Jan SO-Jul SO Apr 90 Jul 81-No,v 92 . Auq 82 7 2 2 6 5 13 6 13 3 B 6 4 6 3 2 3 against October, 1990 being such a low. Given an end to recession In, say, the fourth quarter of 1991, the three- to eight-month lead generally shown by stock market bottoms could produce an important low early this year. It is pointless at the moment to declare that we are in a recession. This Is obvious. The market analyst is faced with the more difficult job of predicting, well in advance of the fact, when that recession will end. ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL INC. Dow Jones Industrials (11 00) 2496.53 S & P 500 (11 00) 314 .53 Cumulative Index (1/10/91) 4489.94 AWTjb No statement or expression oj Opinion or any other maner herem contamed IS, or Is to be deemed to be, directly or Indirectly, an oHer or the soliCitation of an oHer to buy or sell any secunty referred to or menllOned The matter IS presented merely for the convenience of the subscriber While we believe the sources of our information to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herern Any action to be taken by the subscrrber should be based on hiS own InvestlgallOn and information Delafield, Harvey, Tabellinc , as a corporation and I1s oHlcers or employees, may now have or may tater take, POSitionS or trades In respeclto any securrbes mentioned In thiS or any future Issue, and such posrtlon may be dlHerent from any views now or hereafter expressed In this or any other Issue Delafield, Harvey, Tabelllnc, which IS registered wrth the SEC as an Investment advisor, may gIVe adVIce to Its Investment advISOry and other customers rndependently of any statements made In thiS or rn any other Issue Further Information on any secunty menboned herein IS available on request

Download PDF

Tabell’s Market Letter – January 18, 1991

Tabell’s Market Letter – January 18, 1991

Tabell's Market Letter - January 18, 1991
View Text Version (OCR)

TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 —- …——- – 'Jariuary-187 1991 –.- -.- — …. –. Thursday's 114-point rally on the highest trading volume in over a year may be said, HI one sense, to have demonstrated the inherent perversity of financial markets. The DJIA, let it be recalled, had spent late summer and early fall of last year in a 20 decline, universally ascribed to apprehension over the possibility of war in the Middle East. The market bottomed out, for the time being at least. in mid-October, but since then, especially during the last couple of weeks, prices have duly rocketed upward with every news development suggesting that an Iraq war might be avoided, and, conversely, collapsed in response to events indicating the increased likelihood of such a war. After three months of such action, a real shooting war finally erupted on Wednesday night, and the market promptly went through the roof. It can be argued, of course, that the one thing the market was not anticipating was a short. successful war with relatively few casualties, an outcome suggested by what has transplred up to this writing, at least. In our view, however, a more general principle applies. That principle is embodied in the Widely-noted observation that the one thing the stock market absolutely cannot stand is uncertainty. From August through this week, it had been force-fed gargantuan doses of uncertainty. Thus, the emergence of war as fact, rather than as speculation was, at least in part, responsible for the rally, Readers turn to this letter not for political or military punditry, but for comment on the technical pOSition of the market. Let us, therefore, get to such comment. We noted a month ago that many investors seemed to fear that a bull market might somehow sneak up on us We noted that this fear runs counter to past experience, which suggests that bull markets do not arrive quiCkly, but announce themselves early in the game with rolls of drums and blares of trumpets Th u rsdI!Ys…!!lltio1L-c!1rtain!ysounded….clarioncall. Perhaps the simplest standard for measuring the vigor of a rise is percentage change. and the Dow's upswing of 4.57 was indeed only the fifteenth instance of a rise greater than 4 since World War II. No fewer than six major bull markets since that time have been launched by greater than 4 rallies, the bull markets beginning in 1957, 1962, 1970, 1974, 1982 and 197. It must duly be noted that in a couple of cases, 1962 and 1974, the 4-plus rallies took place prior to an initial bottom which was later slightly penetrated. The record is impressive nonetheless. The 1519 advancing stocks also provided an impressive statistic, that total being almost six times as great as the sum of declining issues, 263. Advances likewise totalled 74 issues traded, similarly a level which has, in the past, been characteristic of takeoff rallies. To percent change and breadth must be added the huge volume of 319 million shares, well in excess of twice its normal levels. (The average for 25 days through Tuesday was 138 million shares.) Upside volume was more than seven times the downslde figure. This is nowhere near a record, but still encouraging. The only thing the rally failed to produce in terms of technical strength was an explosion of new highs, only 38 such highs having occurred in NYSE trading. It is not unusual, however, for this figure to begin its expansion well after a market bottom has occurred. For all this, though, the technical picture, in one sense at least, has not significantly been altered by the rally so far. The most recent phase of the market decline began from a closing high of 2637.13 on December 26, following a short-term top formation built up during December between, roughly, 2655 and 2565. It is therefore, possible to view Thursday's move as nothing more than a spike return to that top. Furthermore, as we noted here, illustrated by a chart, on January 4. this is not where the truly heavy supply exists. The crucial area of overhead supply is in, roughly, the 2600 – 2750 area, this supply comprising over a year of trading going back to August 1989. We find ourselves still unable to become fully convinced that the base formed since last October is sufficient to penetrate that overhead supply without further work being done ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (1200) S & P 500 (1200) Cumulative Index (1/17/91) AWTjb 2629.95 327.72 4590.62 — No statement or expression oj opInion or any other matter herein contained IS, or IS to be deemed to be, directly or indirectly, an offer or the soliCitatIOn of an offer to buy or sell any security referred to or mentIOned The matter IS presented merely lor the convenience of the subscriber 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 to be taken by the subSCriber 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 In respect to any securities menlloned 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, Tabelllnc, which IS registeredwlih 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 secuTity mentioned herein IS available on request

Download PDF

Tabell’s Market Letter – January 25, 1991

Tabell’s Market Letter – January 25, 1991

Tabell's Market Letter - January 25, 1991
View Text Version (OCR)

TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987,2300 January 25, 1991 lVe spent approximately tlalf of last weeks letter discussing market action for one single day-,-Januar7, lY9L We intend tospnd t!tis week's edltion.,going into.furttler detail on the same subject. This could-;oCcOUrse,be described'asoVei'kill. Whatrefevance;-the reader may' – well ask, can one day's trading tlave to ttle long-term stock market outlook The answer is quite a bit, if action on ttlat particular day is sufficiently unusual. For there are, technicians have long recognized, short-term patterns that can occasionally afford an insightful glimpse into ttle longer-term, supply-lemand picture. One such pattern, noted by some of the earliest writers, is the selling climsx, In which the market moves down sharply on dramatically increased volume and then turns and, on equal volume, moves sharply to the upside. This is caused. theoretically, by panic selling, which, finally exhausted, is replaced by informed buying once the wave of liquidation has run its course. There is evidence that this sort of pattern has subtly altered in recent years, with ttle first half, the panic-liquidation phase, often being absent. The institutional investors who dominate todays markets, it is reasoned, are less apt to become fear-crazed sellers, but can be stampeded into buying once an oversold market gives evidence of turning. An especially sharp market rise, therefore, is not without significance. The 114-polnt rise in the Dow last Thursday can certainly be appropriately described as sharp, amounting, as it did, to 4.57. If one gauges that day against the vast panoply of stock -market history, it is not all that- exciting, ttlere tlaving been no fewer than 87 larger daily rises since the first computation of the Dow in 1897, and, in the same period, 105 advances of 4 or greater. We need, however, to remind ourselves of the fact that, where market volatility is concerned, the 1920's and 1930's were an era entirely unlike the current one. Of ttle 105 greater-than-4 rises, no fewer ttlan 80 occurred between 1926 and 1940. There followed 17 years, until 1957, before such an upswing again occurred, and, as noted last week, there tlave been only 15 cases since then, within which category January 17, 1991 ranks eighth in terms of perc,,-ntag!lva,,-ce. The association of 4-plus rises with turning points is -unmistakable. There have been. since that time, eight completed bear markets, seven of which had one or more 4 rises associated with their low. In 1957, a sharp advance occurred one day after the market low on October 22. The actual low of the 1962 bear market was at 535 on the Dow in June, but an initial low of 576 was followed by an unusual single-lay rally on May 29. 1970 also saw a large rally ttle day after the bear-market low was posted. In 1974, there were two more-than-4 rallies in October, from the 601 and 633 levels on the Dow, before the average finally bottomed at 577 in December. The 1976-78 bear market was peculiar in that the actual selling climax did not occur on the February low, but ten months later on a test of that low. This was the famous Halloween Massacre, and it was duly followed, on November I, by a 4.4 rally. An additional climax occurred on yet another test, in April, 1980. Finally, the August 12, 1982 bottom was followed five days later by an almost-5 advance on August 17, and two more similar rallies on October 6 and November 3. The two days following October 19, 1987 each produced huge advances, the 10 rally on October 21 being the largest since 1933. To reiterate, of eight bear markets over 33 years, the bottoms of seven have been associated with 4-plus rallies, the only major bear market failing to produce such a phenomenon being 1966. Likewise, the only greater-than-4 advance not associated with a bear market low in these 33 years occurred on November 26, 1963, following the important intermediate-term break set off by the Kennedy assassination. The January advance can also be considered unusual in terms of volume, the 318 million stlares which traded being 2.185 times the 25 -lay average. This manifestation is rare and has taken place only 18 times since 1957. As is the case with 4 rises, these instances have tended to be assooiated with importnt bottoms. Althouh no,such dey cccurred,ln 1966, 1970, or 1974, five of the large rallies discussed above were also heavy-volume days. Finally, there were, on January 17, 1,519 advancing issues, which constituted almost 75 of all issues traded. This number has been bettered only 38 times since 1957, and, once more, the bulk of these instances were associated with major-cycle lows. There are a number of reasons, most of them familiar to our readers, why we are unwilling quite yet to pronounce the end of the 1990–9 bear market. It must be admitted though, that last Thursday's trading constitutes an impressive phenomenon, suggesting that the lows of earlier this month could very possibly constitute an effective bottom. Certainly any further evidence of internal strength in the market would suggest, at the very least, a relatively beneficent intermediate -term outlook. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (1124/90 AWTjb 2652.72 336.35 4727.37 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. No statement or expression of oplmon or any other matter herein contained IS, or IS to be deemed to be, directly or Indirectly. an oHer or the solICitation of an cHer to buy or sell any security referred to or men\!Oned The matter IS presented merely for the convenience althe subsCriber While we beheve the sources of our Information to be reliable, we In no way represent or guarantee the accuracy thereof nor afthe statements made herein Any acllon to be taken by the subscnber should be based on hiS own Investlgabon and rnformattan Delafield, Harvey, Tabell Inc. as a corporallon and Its officers or employees, may now have, or may laler lake, poSitions or trades In respect to any securrbes mentIoned tn 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 an Investment adVisor, may give adVice to liS Investment adVISOry and other customers Independently of any statements made In thiS Of In any other Issue Further Information on any seCUrity menlloned herein IS available on request

Download PDF