Viewing Month: October 1991

Tabell’s Market Letter – October 04, 1991

Tabell’s Market Letter – October 04, 1991

Tabell's Market Letter - October 04, 1991
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TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – – – , October-4. 1991- — – –' We devoted this letter. last week. to an elaborate statistical presentation which. we assure our readers. had a purpose more serious than that of simply filling space. Its intent was to make a nt. that point being that the market action for most of 1991 so far has been. in an historical sense. highly unusllal. As we write these words. the l)ow has just fallen from the plus to the minus side of 3000 for the lOth time this year. Epochal events. such as the Russian coup. its subsequent failure and major nuclear arms reduction. have failed to move the l)ow very far away from its strange attractor. The result haa been a difference of only 9.3 between the closing low snd high of the S P 500 going back to February. We have. by now. become used to this sort of thing. We attempted, last week, to show via statistics that it is highly unrealistic to expect this kind of action to continue forever. It will become more unusual the longer It continues. The average low-to-high range for any one-year period is 26. For 18 months. It is 34 and for two years. 41. Apply these numbers to the l)ow. If the 1991 low of 2470.30 is going to prevail through 1992. an average upside expectation would be 3483. If the August high of 3055 constitutes a peak. a normal downside expectation would be 2276. Our point is that it is difficult to find a bull who will forecast anything as high as the former figure or a bear who will predict the latter one. Yet upside or downside targets much greater than either of these would be totally consistent with the normal volatility of common stocks. Now it is. of course. possible (It is always possible) that a new era haa arrived. There is much talk about the commodltlzatlon of equities. If Indexaton prevails or NYSE prices become nothing more than the arbitraged result of a trading game in Chicago, then all bets are off. Regarding new eras. however, we tend to have our doubts. It becomes necessary, then. to examine the case for extreme price changes. The bullish case, . – argued4rom -themarket-techniclans-point-ofvlew-r..aa-ablypresented-byauralleague-Ken-Tawer — in this space a couple of weeks ago. If one Is willing to hypothesize that October constituted a major cycle bottom. then Dow numbers In the 3500 area become not only possible, but Indeed probable. The bearish case, on the other hand, can be argued most strongly with fundamentals. If one examines the current level of the major averages In relation to earnings and dividends (the precise measures used can of course be the subject of endless nitpicking). equities are now Inarguably at levels historically associated with major tops. There Is, however. a bullish fundamental argument, essentially predicated on an assumed 1992 business recovery. The last major recovery from a recession was In 1983-1984. In the two years following March 1983. S P 500 earnings Increased by about one third. This would, of course, leave room for stock prices comfortably higher than those of today. Agalnst this rosy possibUlty. however. we must recsll the tendency of PIE ratios to fall as earnings rise, thus mitigating, someWhat, the effect of that rise. The bearish economic argument. of course, suggests the posslbUlty of little or no business recovery. This could easily produce the sort of crisis of confidence leading to severely lower levels. The reader will note that we have. in the above comment. been hedging, and we plead guilty as charged. We have tried to examine the probabUlty for substantively different price levels in 1992 without specifying the direction of that difference. As technicians, though. we are able to read only what the market is telling us, and it is falr to say that. in its nine-month refusal to move off of dead center, the market is telling us little or nothing. It seems. in other words, as If the market is at the moment making no assumptions whatsoever about the strength of the recovery. The market's starting to make such assumptions at some future point could cause prices to change SUbstantially. A final bullish point needs to be made. It is, after all. not price levels but the flow of funds which causes securities prices to change. We can, of course, point out. and properly. historical reiationships 'ofearnlngs and dividends to prices-If 'the stock market's now hovering in the vicinity of all-time highs is seen as a part of a money flow Into financial from other assets. it is possible that these historical relationships might Change. Japan, of course, provides an Instance of this previously having occurred in a major market. It is difficult. in summary, to suggest anything other than Vigilance as a watchword for investment policy over the Intermediate term. It does. however, seem fair to suggest that future markets wUl provide us with a bit more excitement than those of the past seven months have afforded us. ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (1200) 2989.94 S l P 500 (1200) 384.39 Cumulative Index (10/3/9ll 6345.55 AWTjb No statement or expressIon of oplnron or any other matter herern contalOed IS, or IS to be deemed to be, dlrecllyor rndlreC1ly, an offer arthe soliCItatIOn of an offer to buy or sell any securrty referred to or menllOned The matter IS presented merely for the convenrence of the subscriber While we beheve the sources 01 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 subSCriber should be based on hiS own investigation and information Delafield, Harvey, Tabellinc , as a corporatJon and Its officers or employees, may now have, or may later lake, poSitions or trades In respect to any securities mentioned In thiS or any future Issue, and such posl\ron 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 or In any other Issue Further Information on any security mentIOned herem IS available on request

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Tabell’s Market Letter – October 11, 1991

Tabell’s Market Letter – October 11, 1991

Tabell's Market Letter - October 11, 1991
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TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON. NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC (609) 987 -2300 October 11, 1991 One of the reasons for the market',s continued trendlessness over the past couple of weeks may be, it has been suggested by ' e analysts, G.qncem CR- the part .of moey agers 9yerthe.possibiHty of a seriou decline during the month ofOctober. Those- managers, it is reasoned, -recan, from legend at least, 'October, 1929, and they certainly remember, from bitter experienCe, Meltdown Monday', October 19, 1987. Even more recent, of course, is the UAL fiasco of Friday, October 13, 1989, which produced a 190-point drop in the Dow and no fewer than 1600 declining issues. While this may constitute powerful folklore, it may well be a misleading interpretstion of the historical record. A study of the Dow's changes for October, since it was first computed in 1897, fails to show any particular downward bias. The diastrous October of 1987 is not even the worst month in market histol)'. The Dow fell 23.2 in that month, but the record for the worst month since 1897 belongs to September, 1931 when the average fell 30.7. Slightly larger drops were also posted in March 1938 and April 1932. In addition, the 20.3 fall of October 1929 was slightly exceeded by the 21.7 decline in May 1940 in response to the fall of France. A look at the overall record for the 93 Octobers since 1897 actually shows more advancing cases than declining ones, 50 rises versus 46 falls. The average percentsge change for the month is, indeed, slightly negative, -I.12. However, three other months also negative average percentsge changes, all of them greater than the October figure. Two-month perioda ending in October do show the worst seasonal pattern for all such perioda, but this is largely due to the effect of September, of which more later. There is, perhaps, some cause for apprehension in the fact that large one-day drops seem to be concentrated in October, or, at least in the autumn in general. October 19, 1987 was, of course, the worst single day in stock-market histol)', and October 28 and 29, 1929 hold second and third place. The DnA has declined 5 or more on 52 separate occasions since 1926, and 15 of these declines, a rather large proportion, have token place in October. Nine such drops have occurred in September and seven in November. Some concern, therefore, about the general fall season may perhaps be appropriate. What is, in fact, especially interesting about the month of October is the fact that it is sandwiched between two months which do, in fact, possess especially significant and interesting seasonal patterns. As we have often noted in this letter, there does indeed exist a month with a particular downward bias, but that month is not OcU;ber, but September. The overall market, as we all know, possesses a slight but identifiable upward bias. That bias becomes more and more evident when one examines perioda of as long as a month. Of — —1131 market months-since-1897, 643 have-seen-the-Dow-move-upward,-and-only-488-have-seen-it-decline.-There-is,–therefore,a-51-T— chance that any given market month will be an upward one. The 94 Septembers on record through last month, though, have produced only 36 advances and 58 declines. Taking all of the 1131 montha, the average change for a given market month is plus 0.56 . For September, the average change has been minus 1.33 . Application of standard test of ststistical significance are applied to this phenomenon, one finds that the tendency in the direction of a declining September is the most significant, slightly edging out the oft- remarked phenomenon of the year-lnd rally. The seasonal pattern which may be of the greatest current practical use, though, is the one which involves November, since that month, in fact, lies ahead of us. By itself, November appears to be quite an ordinal)' month, having produced 56 advances and 37 declines m the DnA with an average rise for the month of 0.74. What is of interest, however, is the fact that November is the only month of the year which seems to possess some predictive value. We have no idea why this should be, but it is a manifeststion we discovered a few years ago, and we remain intrigued by it. We noted above that some 57 of all one-month periods were upward ones. We can of course extend this measurement to longer perioda of time, and the upward expectstion naturally increases. It is 60.9 for six-months and 62.3 for all twelve-month perioda. Let us contrast this with the record for all perioda following an upward November. For all period lengths from one month to one year, such periods have shown a greater expectstion of being upward than would be expected from looking at all periods of similar length. This difference is most striking for intervals of five to ten months in length and is most significant for eight-month periods. Taking eight months as an example, we find that, since 1897, 696 produced rising markets and 433 produced falling ones, thus producing an upward expectstion of 61.6. When we look at eight-month perioda following an upward November, however, we discover that 41 such perioda were upward ones, and only 15 were downward. The percentsge of upward periods, then, was 73.2, significantly higher than the expected 61. 6 figure. Similar results are seen when one looks at the average percentsge change for all eight-month periods following an up November. The norma! expectation for any such period would be a change of 5.08. However the average percentsge change for the 41 eight-month perioda after an upward November is almost twice as great, 9.05. November turned out to be a-good predictor in the most recent case, that of 1990. -It was an upward month with the-Dow posting a loo-point rally from 2442 to 2559. The eight months following this instance of an upward November ended, of course, on July 31st, 1991. On that day the Dow closed at 3024.82, 18.7 above its November close, an advance of approximately three times the norma! expectstion. As far as patterns for the fall season are concerned, then, there does exist some justification for looking for a sharp one-day decline this month, a decline which, we suppose, might manifest itself if a downside breakout from the eight-month-old trading range tokes place. Let us not forget, though, to look at the market's performance next month for a possible clue as to the sort of market climate we might expect in the first half of 1992. Dow Jones Industrials 2973.84 AN1HONY W. TABELL DELAAELD,HARVEY,TABELL S & P 500 380.00 Cumulative Index (10/10/91) 6297.40 No statement or expression 01 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 oHer 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 act!Qn to be taken by the subSCriber should be based on hiS own InvesttgatlOn and informatIOn Delafield, Harvey, Tabelllnc, as a corporatron and Its ofhcers or employees, may now have, or may later take posItions or trades In respect to any secUrities mentioned In thiS or any future Issue, and such poSitron may be different 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 rts 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 – October 18, 1991

Tabell’s Market Letter – October 18, 1991

Tabell's Market Letter - October 18, 1991
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TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 October 18. 1991 Wednesday's new high on the Dow. widely hailed in the press as evidence of newfound financial strength. was. 10 actuality. reaUYDothing.more than a.contInuation oLthesorLof-action themarkethas been exhibiting all-ye.ar. -It-was, in fact, the fifth in-a series of new Dow peaks. -;;ch oe a bit-high'; -;-h;' th;It. -Unfortunately. this new high was not all that different from the first of the series, scored on March 6th at 2973.27, a number that is a bare 2.89 lower than the one achieved this week. Typically, there was, on Thursday, no follow-through as the market, under the mfluence of disappointing inflation figures, retreated from its latest effort to move out of the 1991 trading range. There are a fair number of kmd words which can be said of the market's latest foray into all-lime high ground. Breadth failed to confirm. but only marglOally. and any future strength would undoubtedly produce new breadth peaks to go along with those m the Dow. As was widely mentioned m the press. all of the widely-followed indices of smaller stocks attamed new highs. This IS encouraging, in that it represents a distinct change from the small-stock underperformance of a year ago, but It was, in reality, nothing more than normally expected action given smaller issues' greater market volatility. The Dow Transports were also regularly mentioned. Although. unlike its more familiar counterpart. that average is not in new all-time high temtory. it has been outperforming the Industrials all year. having risen 43.5 from its January bottom as contrasted with only a 23.9 advance for the DnA. 1991 action for the DJTA. morecver. is taking on more and more of the characteristics of the right shoulder of a head-and-shoulders base a formation which goes back to the initial decline from the IOdicator's 1989 high. f such an mterpretation is correct, the upside implications are Impressive indeed. With aU the poSitive action on the part of a wide variety of market averages, it is. we suppose. churlish to note that the S & P 5()() (along with the S & P Industrials) failed to attain new peaks on Wednesday. remaining. at 392.80. about one percent under its August peak of 396.64. Following thIs lengthy discourse on the action of various, assorted market averages, it is well to renund ourselves that most investors at least (in what we cannot help referring to as the good old days. we could have said all investors). do not buy averages but indiVidual stocks. There is no substitute, in our view, for the exhaustive analysis of individual technical patterns as a means of amving at a market opinion. Unfortunately, at the moment, analysis of individual patterns leaves one considerably less euphoric regarding the market, than does inspection of general indicators. –.- The -Dow;,we remind curselves;-founditself-at-a-new-alltime-high-ast -Wedcesday,Inspection-of-the-new-high-list-for that- day. interestmgly enough. reveals only three DnA issues. Goodyear. International Paper. and McDonalds as reaching new indiVidual 52-week peaks. Seven more stocks are reasonably close. This. however. means that no fewer than two thirds of individual Dow stocks were. on the day that the average scored new peaks. significantly below their highs for the past year. Furthermore, we noted above that the Dow is at an all-tune high. When one compares current levels against the all-time peaks of individual stocks. the diversity is striking. as noted in the table below. stock ALLIED-SIGNAL INC ALUMINUM CO OF AMER AMERICAN EXPRESS AMERICAN TEL &TEL BETHLEHEM STEEL CORP BOEING CO CATERPILLAR TRACTOR CHEVRON CORP COCA COLA CO DISNEY WALT PROD DU PONT DE NEMOURS EASTMAN KODAK CO EXXON CORP Oct 16, 1991 High Date High 40.500 MAR 1987 49.250 63.875 OCT 1989 79.625 21.500 MAR 1987 40.625 39.125 DEC 1989 47.000 15.750 JAN 1984 29.500 50.000 JUL 1990 61.875 46.125 SEP 1987 74.750 76.625 AUG 1990 81.625 62.875 SEP 1991 66.500 117.500 JUL 1990 136.500 46.000 AUG 1991 50.000 45.625 OCT 1987 70.667 60.500 APR 1991 61.375 X Diff -17.77 -19.78 -47.08 -16.76 -46.61 -19.19 -38.29 -6.13 -5.45 -13.92 -8.00 -35,44 -1.43 Stock Oct 16 1 1991 High Date High GOODYEAR TIRE & RUBBER 44.750 AUG 1987 76.500 IBM 101.625 AUG 1987 175.875 INTERNATIONAL PAPER 75 .625 OCT 1991 76.000 MCDONALDS CORP 36.125 JUL 1990 38.500 MERCK &CO INC 130.750 SEP 1991 133.250 MINNESOTA MINING MFG 92.375 JUN 1991 97.500 MORGAN JP CO 64.750 OCT 1991 65.500 PHILIP MORRIS COS 73.500 AUG 1991 74.625 PROCTER &GAMBLE 82.875 JUL 1990 91.250 SEARS ROEBUCK CO 39.125 AUG 1987 59.500 TEXACO INC 65.375 APR 1991 70.000 UNION CARBIDE CORP 20.500 FEB 1989 33.250 UNITED TECHNOLOGIES 43.000 JUL 1990 62.500 X Diff -41.50 -42.22 -0.49 -6.17 -1.88 -5.26 -1.15 -1 .51 -9.18 -34.24 -6.61 -38.35 -31.20 Only two issues in the Dow. the table reveals. actually reached their all-time peaks in October of 1991. Only ten of the stocks reached all-time highs in 1991 at all Another seven scored their record peaks in July of 1990. back prior to the downswing which followed the gulf war Seven issues are still below their pre-1987-crash highs. What is more. only thirteen of the Dow stocks. at today's levels fiiid themselves within 10 of their record peaks. – Another ten are down from 10 to 40 percent and seven issues are 40 or more below all time highs. It is this sort of thing, we suspect. that causes the wide diversity in individual patterns. We have passed, It seems to us, the stage of the bull market where a rising tide lifts all boats. Action will. we think become increasingly selective. ANTiiONY W TABELL DELAAELD.HARVEY.TABELL Dow Jones Industrials (1130 AM) 3067.53 Standard & Poors 5()() (11 30 AM) 392.56 Cumulative Index (Oct 17, 1991) 6461.47 No statement or expression of oplmon or any other matter herein contained IS, or IS to be deemed to be, directly or Indirectly, an offer or the sollcltatlon 01 an offer \0 buy or sell any security referred to or mentioned The matter IS presented merely for the convemence of the subscnber While we believe Ihe sources of our Information to be reliable, we In no way represenl or guaranlee the accuracythareof nor 01 the statements made herem Anv action 10 be taken by the subscriber should be based on hiS own InvestlgaliOn and Information Delafield, Harvey, Tabell Inc , as a corporation and Its officers or employees, may now have, or may later lake, positions or trades In respect 10 any seCUrities mentioned In thiS or any future Issue, and such pOSition may be dMerent from any views now or hereafter expressed m 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 mdependently of any statements made In thiS or In any olher Issue Further Information on any secunty mentioned herem IS avadable on request

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Tabell’s Market Letter – October 25, 1991

Tabell’s Market Letter – October 25, 1991

Tabell's Market Letter - October 25, 1991
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TABELL'S MARKET LETTER – 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC \609) 987-2300 October 25, 1991 If one is to believe tbe recent market stories in the financial press, it could be concluded tbat Small is Beautiful bas become 'thestock milrket's new-slogan- The-renaissance of the smallostock—particularly theover-the-counter small stock–is, by now, awi!ely accepted fact. There is some justification for this. The most recent spate of stories bas noted the fact that the OTC Industnals and Composite bave, along witb tbe Dow, been posting newall-time highs, this while tbe S & P 500, presumably representative of larger companies, has continued to languish below its peak close of 396.64 on August 28th. Ukewlse it cannot be denied tbat, since the pre-gulf-war lows of a year ago, the OTC indices have outperformed their large-cap counterparts. The NASDAQ Composite and Industrial mdicators have moved ahead 64.4 and 76.4 respectively since that bottom of just over a year ago while their S & P counterparts could do no better than similar 33 advances. We need, however, to recall a basic fact-the fact that smaller stocks inherently display more stock-market volatility than do larger ones, that tbey regularly move ahead more in a bull market and conversely decline more sbarply in bull markets. If we are to accept market action since last October as being part of a conventional bear market, then the better performance of the OTC indicators is a perfectly normal phenomenon. There will, we should remind ourselves, eventually ensue a cycle-length market decline, and, when this occurs, we should expect small stocks to decline more than their senior brethren. Only after this has occurred will we have tangible evidence of better small-stock performance. The best to gauge the relative action of small versus large stocks is to compute a ratio, in the chart below, which has appeared before in this space, the ratio of the S & P 500 to the Value Line Composite. (Using either of the NASDAQ averages would have produced essentially the same recent picture.) The action of the two averages themselves is shown by tbe thick and thin lines at the bottom of the page, while the upper line plots the ratio. RATIO (VALUE LINE I SIP SOD) S&f' 500 VAI,.UE LINE CCIfI'09ITE —–.-' The most important fact revealed by the chart is that the relative performance of small vs. large stocks is basically a long-term phenomenon. One did significantly better owning small stocks in the early 1960's and from the 1974 low through mid-1983. Since that time the sort of issues which dominate the 500 have been the place to be. Cycles do not, of course, go on forever, and it is possible that the tmy blip at the end of the chart may represent the start of the kind of reversal that took place in 1972-76. That reversal, it should be remembered, though, required almost four years to complete. Thus Ihe case for small stocks at tbe moment rests largely on their greater volatility and the assumption of an ongoing bull market. Investors willing to make that assumption and to accept the risks involved may well be justified in opting for owning smaller issues. Whether supra-cycle outperformance has begun, though, is a point which still remams moot. ANIHONYW. TABELL Dow-Jones Industrials (1200 noon) 3019.45 DELAFIELD. HARVEY, TABELL Standard & Poors 500 (12.00) noon) 385.45 Cumulallve Index (October 24) 6410.47 No ste.lement Or expression of opinion or any other matter herein contained IS, or IS to be deemed 10 be, directly or indirectly, an offer or the sollcllatlOn of an offer to buy or sell any secUrity referred to or rnen\loned The matter IS presented merely for the convenience of the subSCriber While we believe the sources 01 our InformallOn 10 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 InvestlgallOn and Informallon Delafield, Harvey, Tabellinc , as a corporation and lis oHlcers or employees, may now have, or may later take, positions or trades In respect to any secunbes menllOned In thiS or any future Issue, and such poSition may be different from any views now or hereafter expressed rn thiS or any other rssue Delafield, Harvey, Tabellinc , which IS registered With the SEC as an Investment adVisor, may give adVIce to Its rnvestment 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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