Viewing Month: March 1991

Tabell’s Market Letter – March 01, 1991

Tabell’s Market Letter – March 01, 1991

Tabell's Market Letter - March 01, 1991
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 March I, \ 991 The central theme of this letter in recent weeks has been the expectation of higher prices coupled with the.caveat\hatthose .pl'ices.mayweU. not. wind .up. being. all. that. much . higher. .One. ., r. reason for the latter reservation centers around valuation. It has been pointed out by many analysts that equity valuations are, overall. not excessive. For the market averages. these valuations are now in the vicinity of their historic mid -point rather than at the high levels which have tended to characterize market tops. This statement is, however, less true for a group of issues that we have come to term the usual suspects, stocks that have led the market for most of the past decade. Consider the following table whiCh gives some relevant stati.tics for typical examples of this genre. As can be seen, current price-earnings ratios are, in some cases at least, approaching their 1987 peak levels. Sep 1987 1990 1982 Low 19B7 High Earnings PIE Recent HIgh Earnings PIE Coca Cola 5 26 1.35 19.2 54 Merck 11 15 2.10 35.1 104 Philip Morris 51/2 31 1.80 17.2 69 Procter & Gamble 20 52 2.50 20.8 91 Wal-l1art stores 1 1/4 21 SO 42.0 38 2.04 26.4 4.56 22.B 3.83 18.0 4.85 18.8 1.143 3 The five issues in the table all have certain other similarities. They are up sharply from their 1982 lows, 1255 as a group versus 286 for the Dow. Earnings have continued to expand from 1987's third quarter, used to calculate their P/F1s at that years high. Indeed those earnings have approximately doubled. For these issue., the 1987 bear market was only part of a temporary interruption. They were, indeed down sharply in that market. However, all five quickly recovered their losses and, at recent peaks, were, as a group, 85 above 1987 highs. Companies such as .these can be said to be examples of Wall Streefs preoccupation with excellence. Indeed, one of the companies above (Merck) has, for five years, been cited by .—!'ortu ne .,,-s America's most Jldmireg .comp!lny .Fo.rth.emos Lpar.t,thisis .n..periec tlylogical – – – – I phenomenon Looking at the long-term earnings history of any of the five, one sees virtually uninterrupted growth stretching back to the 1950's, often with only one or two down quarters. There can be little doubt that they deserve SUbstantial market premiums. Market premiums, however,\are not without risk. Those of us who have been around for a while remember the premium multiples commanded by a group of companies known, in the early 1970's, as the nifty fifty. Set out below' are figures for five stocks in this group. 1962 Low 1973 Hi Earnings PIE 1981 Hi Earnings PIE Recent High Avon Products 11 Eastman Kodak 10 I B fit 15 Merck 15/8 Xerox 51/2 140 67 90 16 110 2.40 1.50 2.30 ,33 3.10 58.3 44.7 39.1 48.5 54.8 72 44 73 17 73 7.00 3.40 6.25 1.00 7.50 10.3 12.9 11.7 17.0 9.7 42 47 140 104 S9 The history of these companies through the early 1970's is the same as that of the five above through the early 1990's. Their price appreciation, fueled by spectacular earnings growth from 1962 to 1973, was outstanding. At their 1973 highs, they commanded premium mUltiple., multiples which make today's look fairly conservative. Between 1962 and 1973, they managed to go through a couple of bear markets which produced only insignificant downward blips on their charts. However, as we all now know, the post-1973 performance for many of these stocks turned out to be rather dismal. The interesting thing is that earnings progress continued for another nine years after 1973, as a comparison of their 1973 and 1981 earnings in the table will show. Over those nine years the five companies increased their earnings by 167, yet four of the five were, at their 1981 high, considerably lower than they had been in 1973, and three remain lower today. Thus, one of the justifications for technical analysis. What happened between 1973 and 1981 was not fundamental weakness, but simple erosion of investor confidence—the unWillingness to continue to pay extreme premium multiples. After 1981, fundamental problems of one sort of another did set in for four of the five, the exception being Merck, which is why it finds itself in both groups cited above. It is doubtful, though, that the market anticipated this only a decade in advance. None of the above is meant, in any way, to be a prediction. Indeed, one characteristic of both groups is that they endured a number of bear markets with no erosion of their premiums. As 1973 shows, however, premiums are not without risk. ANTHONY W. TAB ELL DELAFIELD, HARVEY, 'CABELL INC. Dow Jones Industrials (12 00) S & P 500 (12 00) Cumulative Index (2/28/91) AWTjb 2894.06 364.03 5604.43 No statement or expression of opln!on or any other mailer herem contamed IS, or IS to be deemed to be, directly or mdlrectly. an offer orthe solicrtatlon 01 an offerlo buy or sell any security referred 10 or menlloned The matter IS presented merely for the convenience of the subSCriber While we believe Ihe sources of our Information to be reliable, we In no way represent or guarantee the accuracy thereof nor 01 the statements made herem Any action to be taken by the subSCriber should 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, posrtlons or 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 Oelafleld, Harvey, Tabellinc , which IS registered With the SEC as an Investment adVISor, may gIVe adVice 10 rts Investment adVISOry and other customers Independently of any S1atements made In thIS or In any other Issue Further Information on any secunty men\loned herem IS available on request

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Tabell’s Market Letter – March 08, 1991

Tabell’s Market Letter – March 08, 1991

Tabell's Market Letter - March 08, 1991
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – – – – , 8 ———-March .-1991–'—- Everyone knows the market does not move in a straight line so each strong trend focuses attention on the coming reversal. The bigger the move, the more attention is paid to the correction. At times this concern may obscure the investor's view of what is really going on. We are currently experiencing what is clearly the strongest market ad vance since January 1987 and perhaps since August 1982. This type of advance tends to last six months or more. The two indicators analyzed below highlight the strength of the current move and suggest that a correction will more likely occur later than sooner. The breadth and extent of the current rally mark it as unusual. It is rare for the breadth to be as strong as it has been. Rarer still is an advance of over 20 percent in only 39 trading days. The ten day advance-decline oscillator rose above 4200 on January 30. This super strong breadth matches that of other strong rallies since 1949 (for historical comparisons. the data has been corrected for the doubling of issues traded since 1949). While there are four instances of super strong breadth occurring in our near bear markets (December 1952. October 1969, September 1973. November 1977). these represent less than 25 percent of all super high breadth readings. The only rallies to exhibit similar strength over the past eleven years are summarized in the table below. Date of First High Breadth Reading DJIA Beginning of First 5 Correction DJIA Percentage Advance January 13. 1987 2012.94 April 16. 1987 2405.54 19.5 –January-lg.1995—11227.. 36-April-21,–l986-,,-,,-c-..—185;'90 -5-1-.-2. — – August 7. 1984 1204.62 August 21. 1984 1239.73 2.9 April 11. 1980 791.55 September 22. 1980 921.93 16.4 As the table suggests, strong breadth readings tend to occur early on in major market advances. As infrequent as these readings are. they must be recognized as a normal part of a strong upswing. More intriguing is the extent of the current rally m such a short time period. The DJIA rose 20.36 percent over the 39 trading days between January 9 and March 6. 1991. None of the bull markets of the 1940's. 50's, or 60's had as sharp a rally. Even in the volatile 20's and 30' s there were only seven similar rallies. Focusing on the past 50 years. only the rallies of October 1982 and February 1975 are as steep. None of the other post war rallies come close. During the 1940's. 50's and 60's. only the rally of December 1962 reached over 15 percent. After achieving the 20 percent level on February 3. 1975. (711.44) the Dow climbed another 10.5 percent reaching 786.53 on March 17 before undergoing a five percent correction. ,In 1982, the 20 percent level was reached on October 6. (944.26) and climbed an additional 12.8 percent to 1065.49 on November 3. before experiencing a five percent decline. While we may not be able to expect another 10 percent advance from the March 6 close of 2973.27 (approximately 3270) before some sort of correction sets in, it is worth noting that very rapid advances such as the current one have occurred near the middle of an intermediate rise, not at the end. From a longer term perspective. October 1982 and February 1975 were near the beginning of major bull markets, Whether this rally is an extension of the December 1987 bull market or the first leg of a new bull market is a question we continue to wrestle with. While not concluslVe. the strength of the current rally. both breadth and magnitude. suggest a more bullish interpretation. KENNETH G. TOWER DELAFIELD. HARVEY. TABELL INC. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (03/07/91) 2971. 78 375.30 5838.21 KGTjb -' No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, dlrectty or Indirectly, an ofler or the soliCitation of an offer to buy or sell any secunty relerred to or menlloned The matter IS presented merely for the convenience of the subscnber While we believe the sources of our Information to be reliable, we In no way represent or guarantee the accuracy thereof nor olthe statements made herein Any acllon to be taken by the subSCrIber should be based on hiS own tnvesllgabon and tnformatton Detafteld, Harvey, Tabe!l Inc, as a corpora\!on and ItS officers Of emptoyees, may now have, or may later take, posllIons or trades In respect to any secunbes menllOned In thiS Of 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 registered WIth the SEC as an Investment adVIsor, maygrve adVice to Its Investment adVISOry and other customers Independently of any statements made In thiS or In any other ISSue Further information on any security mentIOned herein IS available on request

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Tabell’s Market Letter – March 15, 1991

Tabell’s Market Letter – March 15, 1991

Tabell's Market Letter - March 15, 1991
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – March 15. 1991 The recent advance of the Dow Jones Industrial Average toward the 3000 level would suggest —-;— that-a -closing over-this …level-in-the-near-future .. is… a…. distinctpos5ibility–'However, whattype– – – . — … ;(- of market and and how far over this ieve1 remains the interesting but unanswered question. A plausible scenario or this recent advance in the market, which iS 9 of course, over simplified. goes as foUows—lower interest rates in the bond market result in higher prices of long-term Treasury issues. this in turn triggers index-arbitrage buy programs. which sent buy orders to the floor of the 'New York Stock Exchange cauRing stocks to advance sharply. This is precisely what appears to have happened this week through Wednesday afternoon. pausing briefly for the rest of the week for the triple watching hour to unwind on Friday. Last week this leUer analyzed the strength of market breadth and the extent of the current market rise to date. By utilizing the same raw advance/decline data. it is possible to show how much farther the market could in fact advance based on the past history of this series. The table below shows the ten day average of advances divided by the ten day average of declines. Starting in 1949. this series has produced 17 periods when the ration has exceeded 2.0 or more. In many instances. the ratio, reflecting a strong broad market advance, was over 2.0 for a number of consecutive days. – — ADVANCES DECLINES DAYS 144 DAYS 10 DAY 10 DAY OVER TODAYS FORWARD DATE AVERAGE AVERAGE RATIO 2,00 DJiA DJiA CHANGE .JUL 14 1949 476 230 2 072 2 173, 59 200 13 15 289 NOV 20 1950 586 291 2 012 1 231. 53 252,08 8 876 JAN 26 1954 590 294 2 011 1 292.85 350 38 19 b45 JAN 24 1958 610 305 2 003 1 450 66 503.64 11. 756 JUL 12 1962 753 318 2 370 2 590 27 682. 52 15 628 NOV 15 1962 719 348 2 065 5 629 14 721 43 14 669 ..JAN 18 …. 1-96-7—-855 01—2—1-84-a—e4'l916–J2–S-i22 DEC 7 1970 950 448 2 122 2 818 66 890 19 8 737 JAN 15 1975 1025 465 2 207 4 653.39 823 76 26 075 FEB 3 1975 984 486 2 025 1 711 44 829,47 16 590 JAN 16 1976 1047 498 2 101 9 929 63 986.79 6 149 AUG 30 1982 1113 529 2 105 6 893 30 1145 90 28 277 OCT 14 1982 1109 541 2 050 2 996 87 1229 68 23 354 OCT 19 1982 1139 568 2 004 2 1013,80 1218. 75 20 216 JAN 15 1987 FEB 6 1991 FEB 12 1991 1173 110 1110 497 2 358 2 2070, 73 2680 48 29 446 509 2 169 2 2830 94 o 00 o 000 549 2.024 2 2874. 75 o 00 0,000 – –.- What is interesting about this series is the behavior of the market after the peak in each ratio is made. By comparing the DJIA from each peak in the ratio to a period approximately six months (144 trading days) forward. an unexpected phenomenon of this momentum indicator is observed. Rather than indicating a possible correction from an over-bought condition. i.e. a strong plurality of advances over declines for a minimum of ten days, we find the average advance for the first fifteen observations since 1949 has been 16.85 percent with the market being higher in every occasion approximately six months after the peak. If we were to apply this average percentage advance to the two most recent peaks in February of this year, an upside projection in excess of 3300 would be Indicated sometime in the fall of this year. There can be no doubt that we 'have had since January of this year an impressive dynamic stock market advance—from January 9 through March 6 the DJIA has increased 20.36 percent in just 39 trading days—in a short period of time. Since such rallies generally take time to lose momentum, it would appear likely the rally will continue. Higher prices are indeed indicated. The 'projection' of 3300 'mentioned-abOve falis within the -upside objective of 3100 from a short base formation last fall and, going back to the 1987 -88 base that remains intact, an upside target of 3400. All this brings us back to our original unanswered question, Is this a mature stage of a bull market started from the October 1987 low or the start of a new bull market Point and figure chart analysis and momentum indicators such as the one discussed above would, for the intermediate term, argue for higher levels in stock prices 10-15 percent above current levels extending possibly into the fall of this year. If this is true, it appears a positive market environment is currently present while we wait for the answer to unfold. Dow Jones 'Industrials (12 00) S & P 500 (1200) Cumulative Index (3/14/91) RJS jb 2944.06 373.26 5847.98 ROBERT J. SIMPKINS, JR. DELAFIELD, HARVEY, TABELL INC. 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 soliCitation of an offerlo buy or sell any security referred to or mentIOned The maner IS presented merely for the convenience of the subscnber Wh1Ie we believe the sources of our information to be reliable, we In no way represent or guarantee the accuracy thereof nor olthe statements made herein Any aclion to be taken by the subSCriber should be based on hiS own Investigation and InformalJon Delafield, Harvey, TabeU Inc, as a corporatIOn and tis offICers or employees, may now have, or may later take, posillons or trades In respect to any secUrities menboned In thiS or any future Issue, and such postllon may be different from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabelllnc, 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 security mentioned herein IS available on request

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Tabell’s Market Letter – March 22, 1991

Tabell’s Market Letter – March 22, 1991

Tabell's Market Letter - March 22, 1991
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD. eN 5209, PRINCETON, NEW JERSEY 085435209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – March 22, 1991 The week's major stock market event can be said to possess, at the very least, a fair amount of symbolic significance. On Tuesday morning, it transpired that IBM was holding,a telephone. -' '—conference-with'-securities-analysls 'whofollowed-the company.- Those a'n-alists, representing- some of the highest powered research departments in the financial community, had been estimating earnings in the first quarter (which, remember, ends next week) in the range of 1.60 to 1.80 per share. The purpose oC the conference was to let these worthies know that actual earnings would be something on the order oC half oC that. Ceasar had been knocked off his pedestal. The Dow was down 30 points before IBM opened and, by the end of the day, with Big Blue's 12 3/4-point loss, had been trimmed by 62 points. At the week's low, America's largest company was selling over 20 below its high of 139 3/4, achieved barely over a month ago. Since this was a loss of 1.64 billion of market value, the significance was perhaps more than symbolic. A few comments may be appropriate at this point. Since this is a technical market letter, it should first be noted that, based on purely technical factors, IBM appears attractive at around its current price. The correction has returned it to strong support in the upper part of a three-year base in the 90-120 area, and we continue to feel that this premier company represents solid long-term-value. Secondly, at this morning's prices, the Dow is down a bit over 4 from its high reached early this month. Traditionally, a move of this magnitude is considered to be of little more than trading interest. We have stUl, it seems, not accustomed ourselves to a Dow level of 3000, where a 100-point move is just over 3, and a lI8-point move in each of the 30 components produces a change in the average of 7 1/2 points. The reason that the IBM disappointment produced so much nervousness, we suspect, is that it raised the question of whether the stock market might be wrong. There exists, it seems clear to us, a conventional wisdom regarding what the market has been doing since mid-January. It had been only a month before. that, in the throes of a disasterous Christmas selling season, that the fjnl!lial pgs–.ggQ.nto-,.lnform….usthtwewer.e.. tainly-J nA.reces.qion .Fol1Qwing…. Operation– —– Desert -Storm, there occurred what ranks, by many measurements, as one of the more dynamic short-term upswings in modern stock -market history. Within a couple of weeks we began to be told, without any precise explanation as to what the connection was, that the sucess of the Middle East War somehow indicated an early end to that recession. Were the IBM earnings casting some doubt on that forecast We are inclined to doubt it. While we were away on a fortnighrs vacation, our colleagues Bob Simpkins and Ken Tower were noting in this space that strength of the magnitude of January-March 1991 has, in the past, with a fair degree of reliability, tended to presage higher prices, at least over the intermediate term. The breadth of the rise to date signifies, in other words, the sort of supply-demand situation which indicates an extension of that rise. It had been suggested in a number of quarters that evidence of the markers excessive anticipation can be deduced from the relatively high level of current stock prices vis-a -vis fundamental factors. The S P 500 finds itself selling for 2 1/2 times book, with a yield now falling close to 3 percent. It is priced at 17.6 times the 21 it is expected to earn for the 12 months ending in March. These are not bargain levels. However, we do not find ourselves, for the time being at least, all that distressed at these relatively high levels of valuation. It can be noted, first of all, that as far as profits are concerned, the recession has been going on for some time now. since, to be exact, the second quarter of 1989, when SloP results were about 17 above current levels. Under these conditions, the expectation of a recovery starting. say. in the third quarter, does not seem unreasonable. There will be earnings shocks, such as the one provided by IBM, but we have some confidence in the market's ability to survive them. There are, moreover, a number of historical parallels for recent market action. By the final quarter of 1957. for example, S P earnings had declined 9 over the past year, They were to continue declining. for another year, drepping-14 1/2 frem tIle third' quarter of 1957 to the third quarter of 1958. In that 12 -month period, however, the market advanced some 30. We have mentioned in the past that the late Fiorello H. LaGuardia once said, I don't make many mistakes, but when I make one. it's a beaut. He could have been talking about the stock market. It is indeed possible that the markers admittedly sanguine view of the present economic scene may turn out to be mistaken. If this is true, however, it would be a historically unusual event, and we would prefer to await more evidence before pronouncing that such is the oase. Dow Jones Industrials (12 00) SloP 500 (1200) Cumulative Index (3/21/91) AWTjb 2847,77 366.60 5798.77 ANTHONY W. TABELL DELAFIELD, HARVEY, TA-BELL INC. No statement or expression ofop1n1on or any other matter herein contamed IS, or IS to be deemed to be, directly or Indirectly, an offer or the solICitatIOn of an offerlo buy or sell any secunty referred to Of mentioned The matler IS presented merely for the convenience 01 the subscnber While we believe the sources of our mformatton to be rehable, we In no way represent or guarantee the aCcuracy thereof nor althe statements made herem Any action to be taken by the subscriber should be based on hiS own Investtgatlon and 1I1formallOn Delafield, Harvey, Taben Inc, as a corporation and lis officers or employees, may now have, or may later take, positions or trades In respect to any securles mentioned In thiS or any future Issue, and such position may be different from any views now or hereafter epressed .n thiS or any otner Issue Delafield, Harvey, Tabellinc , which IS registered With the SEC as an uwestment adVisor, may give adVice to lis Investment adVISOry and other customers Independently of any statements made In thiS or In any other Issue Further Inlormabon on any secunty mentioned herein IS available on request

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Tabell’s Market Letter – March 28, 1991

Tabell’s Market Letter – March 28, 1991

Tabell's Market Letter - March 28, 1991
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TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 March 28. 1991 – The honeymoon stage of the market advance is. by now. probably over. It has been all of 17 trading dayssi!'ce on Mar !h Dow re!l–I1dfi,,;month high at 2973. 27.withthe SLP – concomita-iitly postmg a newall-time high. A fair number of relevant facts regarding the markers current position can be gleaned from the chart below. a ten-point-umt. point and figure chart of the DJIA going back to last August. Probably the most important feature of the chart is the base formation built up from last summer to mid-January between 2370 and 2640. This can be counted along the line designated as A-B. yielding an upside objective of 3100. Other targets are discernible. both from this chart and charts with other scale-units. but most of them center around this figure. suggesting new highs but only by a modest amount. It is the pattern at the right of the chart that is of short-term interest. Like Ceasar's Gaul. it can be divided into three parts. the first. at C. being the area between 2860 and 2930 which encompasses trading for the last two weeks of February. The second part. at D. is the range formed after the move to near-3000 in early March. and a third portion at E. initiated by Tuesday's 50-point rally appears to be beginning to form. An aside is necessary at this point. On no fewer than three different occasions. designated on the chart by the question marks. apparent downside breakouts from this formation. obviously false. took place. False breakouts of this nature have become an increasing problem for the technician. and more and more it is necessary that they be confirmed by other evidence. The essential point to note about the formation in question is that the 2850 (approximately) level has held. Were it to be penetrated. a fairly important correction. now counting all the way back to the original base back around 2600 could be visualized. This count. shown at F -G. is a possibility that needs to be kept in mind. but it must be emphasized. with 2850 having held on three tests. there is no suggestion that such a downside breakout is likely to materialize. This unlikelihood is further suggested by the better pattern \ for. the S.& P 500, which(the .recent portion only) is shown at … -;,. left. Unlike the Dow. which pushed back well into its February iTO trading range. the 500 managed to rebound from the top of that range and it now finds itself much closer to a new high. This pattern. therefore. does not posses the potent,al head -and -shoulders aspect of the DJIA pattern. Indeed. the S & P Composite has consistently been outperforming the Dow. The S & P-Dow ratio. using the October 11 low as a base equal to 100. had increased to 103.34 as of yesterday. It can be noted that this sort of outperformance has. in the past. generally been indicative of ongoing market strength. ANTHONY W. TAB ELL DELAFIELD. HARVEY. TABELL INC. Dow Jones Industrials (300) 2925.00 S & P 500 (300) 375.42 Cumulative Index (3/27/91) 5897.35 AWTjb —

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