Tabell’s Market Letter – March 20, 1992

TABELL-S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 March 20, 1992 It was the best o/times, it was the worst o/tm,es… it was the season o/Light, it was the season of , —- D.akrress,,tJvasJhespring a/hope, it.wasdhe wmter-of.despair..'!-, – -'- — —.—. – – . – Charles Dickens, A Tale of Two Cttles Mr. Dickens' famous quotation could be used, in 1992, as the lead for A Tale of Two Markets.' The two markets are those of -a'IItho- tl.S. and Japan, and, indeed, the contrast could not be greater. True, it is certainly possible to interpret the tenpoint, point-and-figure pattern for the Dow, shown at left, as representing a short-term top, with this week's early strength constituting a move into overhead supply. That's the bad news. The good news is that the downside objective in the low 3,OOO's represents strong support, and any move to that level would constitute a buying opportunity. In any case, our U.S. market remains within a few percentage points of its all-time htgh. Across the Pacific, however, the story is entirely different. The Nikkei Index peaked on December 29, 1989 at 38,915, at which level it was up over 1000 from only 3,355 in 1974. Meltdown Monday of 1987 in New York produced only a minor blip in Tokyo which, at its peak, had exceeded is 1987 high by 46 while the Dow, by 1989, had barely equalled its 1987 peak. From there, the divergence began. Tokyo .od to-acccmpany-Wall-Street-into'Ilew-high territory – – Dew JONES INDUSTRIAL AVERAGE in 1990, and when we, in October, 1990, were down 10 POINT barely 20, the Nikkei was off 48 at 20,221. On Tuesday of this week, it broke below that low to 19,837. Indeed the Japanese bear market is one of record-setting proportions. The 48 fall is not only the biggest drop in Japanese market liistory, but one of the largest on record for any market. Our biggest decline in recent years is the 45 drop of 1973-1974, and even september-November, 1929 was under 48 . Our friends across the Pacific are clearly playing in the big leagues when it comes to bear markets. Nor, can the outlook, from a technical point of view be srud to be alii that encouraging. At right is shown a WOO-point P&F cbart of the NiKkei, and that last posting at 20,000 looks, for the moment at least, to be addller. We would certainly want to await evidence of technical strength before' buying into that particular chart pattern. Ironically, the current conventional wisdom holds that an all- powerful Japan can do Just about anything it pleases, as far as its economy is,concerned. It is stated tbat they will not allow tbe Tokyo market to go down much further, much as another they' was going to stave off the ongoing market decline in the early 1930's. lhdeed the history of that era might well be studied by the Japanese powers tHat be. What was essentially a stock-market phenomenon in the fall of 19'29'turned into something a good deal more pervasive 10 1930-32. We in tlie'lllnrted States managed to avoid this outcome in 1987. It is devoutly to be'wislied that the Japanese will prove as successful in the early 1990's. It has always been the contention of the technician that stock markets tend to lead, rather than follow, the economy. By tbe time Americans were beginning to become aware of Japanese competition, the Nikltei, which, wben tbe Tokyo Stock Exchange opened in 1949, was NIKKEI INDEX 1000 POINT selling at tbe same level as tbe Dow, was at ten times the DnA's level. Now that Japan-bashing has become tbe polibcal fad of tbe day, it suddenly emerges that Japan's Stock Exchange has undergone one of tHe largest collapses in the history of finanCIal markets–a phenomenon providing a qUlte different impression of that country's economy fiom the one we tend to derive from the daily press. At the very least, the devastation of the Nikke. may be suggesting that the long outpmGrmance of the U.S. stock market by Japan's may be over. AN1HONY W. TABELL, CMT JJ)ow, Jones Industrials (1200) 3268.11 DELAFIELD, HARVEY. TABELL Standiml & Poor's 500 (1200) 409.78 Cmulative Index (3/19/92) 7394.73 Nostalemenlor expression of opinIOn or any other matter herein contained IS, or IS to be deemed to be, dlreclly or mdlrectly, anoner or the soliCitation 01 an offer to buy or sel! any security referred to or mentioned The matter IS presented merely for the convenience of the subscnber While we believe the sources of our mformatlon to be reliable, we In 00 way represent or guarantee the accuracy thereof nor olthe statements made herem Any action to be taken by the subSCriber should be based on hiS own mvestlgaliOn and Information Delafield, Harvey, Tabell Inc, as a corporallon and Its officers or employees, may now have, or may later take, pOSitions or trades In respect to any secUrities mentioned In Ihls or any future Issue, and such pOSllion 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 mvestment adVisor, may give adVice to liS mvestment adVISOry and other customers Independently of any statements made In thiS or In any o1her Issue Further mformatlon on any security mentioned herem IS available on request