Viewing Month: June 1992

Tabell’s Market Letter – June 05, 1992

Tabell’s Market Letter – June 05, 1992

Tabell's Market Letter - June 05, 1992
View Text Version (OCR)

TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 June 5, 1992 It IS, to put it sImply. boring. For all of 1992 so far, almost a half-year now, we have witnessed the same sort of stock market. What -has basically been taking place, asthe mediacertainly do-not tire of telling us; is that-the DoW-Jones-Industrial Average has been – moving ahead–although not by all that much–while just about every other market indic;'tor remains in a neutral or downward trend. The record is worth examining. The Dow closed 1991 at 3168.83. On Monday, it reached 3413.21, breaking 3400 on a closing hasis for the first time. (Eventually, one would hope, these crossings of even-hundred-pnint figures will become so ubiquitous that we won't have to menlton them anymore.) At any rate, this constituted an advance of 7.71 , a number which can hardly be called earth- shattering. Periods of comparable length during which the Average has advanced 20 have heen common during the 1980's and 1990's. The rise has, nonetheless, heen a persistent one. For example, there have heen, through Wednesday, 105 trading days in 1992. The Dow has posted a new bull-market high on 22 of them. This works out, on average, to a new high's being posted somewhat oftener than once every five days. ThIs average compares quite closely to the actual experience. There was a thirty-day hIatus between March 3rd and April 14th during which no new high was made. (The total decline involved was only 3.31 ). Ontside of this one period—and one other lI-day gap in April-May- there has been, Ibis year, no period of longer Iban seven days when a new high was not made. We are not trymg here to invent a number Or yet another mtereshng fact not worth knowmg. We think there is a psychologically positive value to an environment in whIch mvestors are able to read in the paper, about once a week, that a new high is being made. This persistence on Ibe upside provides a contrast with the noiddle part of 1991, with which this market has often been compared. There was, at that time, a sinoilar slight upward bias, but Ibe interval between new highs being posted was much greater. Between April and October there were only seven days on which new highs took place with. obviously, extensive gaps in between. Meanwhile, as everyone is aware, the Dow's performance. unexciting as It is, is far superior to the record of just about any other measurement. On Monday, when the Dow closed almost eight percent above its 1991 final figure, Ihe S & P 500 had moved to a level just twenty-one one-hundredlbs of point below ilB 1991 close. We all know the approXImate record of Ibe 500 Its high was aclueved back in January at 420.77, and it has not been able to equallbat peak SIDee, despite those 22 new highs m 1992 for the Dow. Between January and Apnl it fell some 6.24 and, indeed, at its high of Ibis week, was under where it had heen back on May 11th. -Or,-for an example of-even-worse-performance;-let-uscolisider-secondaty-stocks. The OTe-Industrial Index-currently stands- four percent below its 1991 close, and its recent performance actually is not all that bad. Between Its high (also in January) and a low m April, it fell by almost 17 . It has sinee managed to recoup about a quarter of its loss. It has been suggested that part of Ibe reason for the superior performance of the Dow has been the no no fact that it is an Industrial average, and that 1t is cyclical, heavy-industry companies that have prOVIded no no market leadership in recent months. One of the 'b'blP III ,lllll rl I….. 1',1' .11 . .I'lIII — , ,.100..1111 Il .- II ! rI (relatively) rew stocks that have been appearing of late on the new-high list is, as a typical example, Almninmn Company of America, a Dow component, whose two-point unit, point-and-figure chart appears at left. It can hardly be called a bad chart The base in Ibe 50-74 area formed smce late 1989 and shown by the dashed lines is impressive and the ability to reach ALUMINUM COMPANY OF AMBUCA 2POINT AA new peaks suggests the potentIal for an upside target close to twice current levels. One can, though, be pardoned for wondenng, just what combination of circumstances is going to be required to produce such a figure. For 1991, Alcoa earned 71 cents per share. This was, admittedly, after one of those one-time charges wmch have turned out to be Ihe bugaboo of analysts Thts charge amounted to 2.55. Even after it is removed, though, Ibe pie IS close to 25. Ab, but we have that magIcal recovery in prospect for 1992 which presumably will cause everythmg to come up roses for cyclical companies. Not, apparently. for Alcoa, though. since consensus estimates call for operatlOg results to be flat for 1992. (First quarter earnings were down.) It is perfectly pOSSIble to argue, of course, that. as m any cyclical company, peak earning power for AA is a good deal higher. Indeed eammgs of over 10 per share were posted in 1989 It is less easy to argue that a prenoium multiple should be applied to those eammgs, if as and when they emerge. Indeed, Alcoa's high for 1989, the year m which those earnings were posted, was about the same as today's pnce Now we are, of course, technicians. and. as such, we have a great respect for the market. It is lOdeed quite plausible that. in the chart pattern for Alcoa and in its perSIstent firmness for 1992. the market is telling us that the prospects for recovery are a great deal better than those contatned lD forecasts aV3.11able so far. It would by no means be the first time In financial history that the market has proved to be a better forecaster than many experts. Full valuations and lack of market breadth, though, make the investment outlook in mid-1992 a perplexmg one ANTHONY W. TABELL, CMT Dow Jones Industnals (1200) 3381.06 DELARELD, HARVEY, TABELL Standard & Poors 500 (1200) 412.17 Cumulative Index (6/4/92) 7418.25 No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, directly Of indirectly, an offer or the soliCitation of an offerle buy or sell any security referred to or mentioned The matter IS presented merely lor the convemence 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 Investlgallon and information Oelaheld, Harvey, Tabelllnc, as a corporallon and Its oftlcers 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 pOSition may be different from any views now or hereafter expressed In thiS or any other Issue Oelafleld, Harvey, labellinc , 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 Fur1her Informallon on any security menlloned herein IS aVailable on request

Download PDF

Tabell’s Market Letter – June 12, 1992

Tabell’s Market Letter – June 12, 1992

Tabell's Market Letter - June 12, 1992
View Text Version (OCR)

TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON. NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC (609) 9872300 June 12. 1992 It has been widely reported just about everywhere that the Dow Jones Industrial Average is outperfonrung just about every other market-indicator,especiallheS &P- 500. This phenomenon ,0 howerer.;-has-not oftertbeeri'-e'Xaninied in great detall,Land an attempt at – some specrfics.' therefore wIlI'be made here —- I Date I OJI. I I I I I eng S8tP600 fIE, Chg Retlo It is appropriate to start some six months ago. When, on December 10, 1991, the DnA made its most lG-Occ-91 03Jan-92 2863 82 320148 11 79 377.90 41934 1097 1320 1310 recent low at 2863.62. The table at left shows the closing price for the Dow on selected dates since that time and its percentage change since the base date The 13-Jen-92 , 6-J8n-92 318660 326860 11 24 1378 41434 42077 984 11 34 1l.01 1291 same information for the same dates is shown for the S00, and the final column simply shows the ratio of the two–the S & P diVided by the Dow. Of this. more 17-J8n-92 28J8n-92 326498 3272 14 1401 1428 41886 41498 1084 98' 1283 1268 later. The table clearly shows the DnA's supenor performance. Its first rally, to January 3rd, was 31-Jfl1'I-92 322339 1256 40879 8 88 greater, and. by January ISth. the SOO was to score its 12-Feb-92 28-Feb-92 03-Mar-92 08-Apr-92 l1-Ma'f-92 327683 328332 329026 3181 36 339768 1442 1486 1499 1109 1864 41713 41636 41286 39460 41849 1038 99' 926 43. 1074 1273 1266 1266 1240 12.32 high for the year so far, even at that high, being up less than the Dow. The latter continued to new highs on January 17th and 28th, but the corresponding figures for the S & P were lower. After a correction. the Dow, at the end of January, was ahead by half again the 500's 8 rise. The next S & P high was on February 12th, 01-Jun-92 1O-Jun-92 341321 1918 -334322.- 1674. 41730 407,21),. '043 777- 1223 1218 and again the Dow proceeded to new peaks With the braader mdicator fading to do so. By the end of the -next correction-m-Aptil;-the DnA' was-ahead almost twice as much. The Dow scored a significant new peak in early May, and the S & P failed to do so. Finally, an unconfirmed new DnA high took place on June 1st, and, as of Wednesday, that average was ahead 16.74 vs 7.77 for the 500. Naturally the ratio of the two has been steadily declining. The table at nght attempts to provide some explanalton of why this may be so The Dow, remember, is a price-weighted average, so POINT6 CONTRIBUTED TO ADVANCE tN DOW JONES AVERAGE the higher a given stock's price, the more weight It possesses in the index Also, due to Dow Jones method of split adjustment, the divisor is now around .48, which means that every pomt move in a given stock results 1fl something greater than a two-point rise in the Average ltself. In any case, the table shows how many points of the DnA's 480-point move since December 10th each individual stock has contributed. (The numbers do not add up to exactly 480 due to Alcoa 44 Chevron Allied Si1l Caterpillar …..40 Texaco 40 Goodyellr 37 MMM Procter &. G 3' COClI Cola '8 Beth SleeI 8 '8 IBM 8 17 Philip Morris 7 17 Westlnghee 8 '4 Inti Paper , statistical complications, but they are close approximations) The stocks are shown in order of their contribution to the Average's advance. As can be seen, of the first eight stocks In the list, seven are cyclical issues which, as we have been pointing out, have of late been assuming leadership. Those seven stocks have accounted for 239 points or just about half of the Dow's total rise. Meanwhile, the amount Gent MOlars Union Carbide Genl Elec McDonalds 3' 24 23 22 'on Ou Pont Arner Exp Arne! Tel '3 Bo…. 2 13 Woolworth 2 Me.ek ., .EMtman Koct subtracted from the Average's performance by such consumer-nondurable issues as Coca Cola. Philip Morris. and Merck has been relatively Disney Untd Tech JP Morglln '3 smalJ. The picture for the capital-weighted S & P 500 is qUite different No fewer than seven drug issues, for example, are among the thirty stocks having the largest weight an the Standard & Poors Composite, and all are actually down for the period. These issues alone have managed to subtract almost three points from the broad index's total rise of Just under thirty points. The ratio of the S & P to the Dow, shown ill the table at the top of the page, is as good a measure as any of the former's relative underperformance. It has declined from 13 20 to 12.18, a drop of 7.S8 m 126 trading days. Such underperformance is a fairly rare event. Since 1937, there have only been five instances in which the decline in the ralto was greater than seven percent over a penod of comparable length. Interestingly, a couple of these have, contrary to widely held belief, occurred around major bottoms. One case was from June to August 1970, and another from July through September 1984. There exists a Wide body of work which suggests that underperfonnance by the S & P is bearish, but there may well be an exception in extreme cases such as the present. We Intend to examine this issue further in future letters. ANTIIONY W. TABELL. CMT Dow Jones Industrials (1200) 3370.18 DELAAELD,HARVEY,TABELL Standard & Poors SOO (12.00) 411.30 Cumulative Index (517/92) 7325.16 No slalamenl or expression of opInion or any other matter herein contained IS, or IS to be deemed to be. dlrectty Of indirectly, an offer or the soliCitation of an offerlo buy or sell any security referred to or mentioned The matter IS presented merely for the convenience of the subscnber While we beheve the sources 01 our information 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 should be based on hiS own Investigation and Informallon Delafield. Harvey, Tabell Inc as a corporation and lis officers or employees, may now have, or may later lake, pOSllions or trades In respect to any seCUrities mentioned In thiS or any fu1Ure ISSUe, and such pOSItion may be different from any views nowor hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabell Inc. 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 securrty menlloned herein IS avallabte on request

Download PDF

Tabell’s Market Letter – June 19, 1992

Tabell’s Market Letter – June 19, 1992

Tabell's Market Letter - June 19, 1992
View Text Version (OCR)

TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (6091987-2300 June 19, 1992 June has brought, along with roses and boneysuckle, what may be 1992's most serious market weakness to date, at least msofar as theDJIA is conpemed. Not that it is Iy aJj that. serious. The-'a..erage wasdown,asof ,esterdaycs CIose4.08 ..hardly an 4 earthshaking amount but, nonethelesS, the Year- deepest drop so far. Historicaliy;-weIlave looked for markets to move 5 or more before being willing to recognize a minor trend. However, the last downturn of 5 or greater took place over six months ago—the 6.93 fall in the Dow between October and Deeember of 1991. The previous one was the August-October 1990 bear market, and prior to that the last greater-than-5 drop was in October 1989, more than 2 112 years in the past. We mention this only by way of suggesting that market weakness has been a fairly rare commodity of late, and we therefore feeJ we owe our readers an assessment of the prospects of further weakness following what we might have regarded in the past as nothing more than a minor blip. At any rate, the current ten-point , P & F pattern for the Dow is shown at left. In many ways the exhibit can be said to be an embarrassment for the classical point- and-figure chartist, at least insofar as 1992 action is concerned. After its initial runup, which was over by mid-Januaty, the DnA stalled at 3290 remaining between that level and 3200 for three months, with a heavy level -DOW JONES-INDUSTRIALS – of trading activity producing the broad, tradingrange pattern shown at the middle of the chart. thirty-two points, closing at 3181.35 and touching a level some forty points below that on an intra-day basis. That action produced a downside breakout from an almost textbook version of a top. . A less likely top, though, could hardly be imagined. Starting the following day, the market put on six consecutive advances with the Dow moving ahead a total of 185 points, reaching 3366.50 on April 16th, crashing through to the upside of the massive trading range. Ironically, what seems to be taking place now is the formation of a pattern similar to the one which formed in Januaty-April. The latest Dow advance stalled just above 3400, and a toppy-looking trading range has ensued. Wednesday's forty-two-point drop looked very much like the false breakout of April 8th. Is the aftermath of this downswmg going to be another explosion into new high territory and, if so, should we forget about point-and-figure charting altogether We doubt it. False breakouts have occurred in the past, recently, it would appear, with increasing frequency, and will undoubtedly occur again. We think, though, that the trading ranges on the chart above show important levels of denumd and supply for stocks. One such area, in the upper 34OO's has proved, for the time being at least, to be unsustainable. 3300-3200, having turned out not to be a top, now shapes up as an important area of demand. Not coincidentally, the most recent putattve top formation suggests a move into it, roughly to 3210. It will be important for 3200 to hold. The first breakout below It may have proved false, but we would not be inclined to dismiss a second one. Even were such a breakout to take place, however, another area of demand would be encountered. We can observe this by enlarging the scale of our P & F chart to the 50-pomt unit shown at the right. On that one, the two recent ranges, shown by the arroWS, look tiny t but the next area of demand which eXlsts at, roughly, 3000-2900 shows up to be, in comparison. truly masSIve. Even Were the worst-case scenario to emerge and the 3300-3200 support prove ,, DOW JONES INDUSTRIALS MID 1987 50 POINT ephemeral, this lower trading area should provide massive support. It must, in addition, be DOted that even a deep penetration into that area would constitute nothing more than a drop of approximately 15, one we are used to calling nothing more than an intermediate-term decline. We are, It seems to us, in the midst of a market pattern that is stIll unfolding. As this pattern slowly matures, the areas of demand for the Dow, outlined above, will prove useful benchmarks as we try to assess probabilities. AN1HONYW. TABELL, CMT Dow Jones Industrials (1200) 3298.73 DELD,HARVEY,TABELL Standard & Poors 500 (1200) 404.08 Cumulative Index (6/18/92) 7286.32 No statement or expression of oplnton or any other matter herein contained IS, or IS to be deemed to be,dlrectly 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 subscriber Whllo 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 herein Any acllon to be taken by the subSCriber should be based on hiS own investigatIOn and information Delafield, Harvey, Tabellinc , as a corporation and lIs officers or employees, may now have, 01 may later take, poSitions or trades In respect 10 any secunbes menlloned In thiS or any future Issue, and such POSition may be dlfferen! from any views now Of hereafter expressed m !hJS or any o!her Issue OeJafJeJd, Harvey, TabeJJ Jnc, 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 Informal!on on any security mentioned herein IS available on request

Download PDF

Tabell’s Market Letter – June 26, 1992

Tabell’s Market Letter – June 26, 1992

Tabell's Market Letter - June 26, 1992
View Text Version (OCR)

—– —–o— – – – – – – – – – – – – – – – – – – TABELL'S MARKET LETTER 5 VAUGHN DRIVE, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 – , June 26, 1992 Most of the week's-marlcet action featured.u'OCovery attempt-from the decline which bad-reached a closing DJIAJow of – 3274.12 last Thursday. There occurred a couple reasouable advancing days-over 1000 advancing issues last Friday and this Thesday. The Dow, however, pulled back as it touched 3300 at mid-day yesterday. 'This w.. not surprising. 3400-3300, the area of the original top on the Dow constitutes fairly heavy overhead supply, and a great deal more demand than bas so far beeu manifested i. going to be required for that supply to be penetrated. II remains our suspicion that the present test of the overhead will be unsuccessful and that the curreut short-term decline will press on to new lows probably somewhere in the low 32OO's. As we noted last week, we think the ability of the 3200 level to hold will constitute Ihe next important markel test. Meanwhile, the familjar pattern of the Dow's outperforming jusl iIbout everything else in sight continues, and the other indices continue to form their own patterns. As recently as Thesday, the Dow Transports moved to a now low below 1300, suggesting an ongoing downtrend. 'This drop, moreover, takes the DITA below its bottom of April 8th, a figure which the Industrial., whose April low was 3181, have not yet breached. The Transports are now down some 12 from their February closing high of 1467.68. As i. the case with the Industrials, it would appear that the DITA is about to test major support, the demand level for this indicator occurring, roughly, at the 1250-1100 area. The exi.ting top would suggest that a good .iud thrust into this support area 'llight take place. As is the case with the DJIA, a break below this support could have .erious consequences. The Dow Utilities have, for whatever reason, the best pattern of all the major averages. An outstanding very-long-term patlern developed when, in early December oflast year, this index moved above the 220 level. Since that time its relative action has been poor, and it has nol been able to po.t a new high in 1992. Indeed, in March-Apnl il moved down into the low 200'., testing an area of strong support. At the moment, the Utility Average's ability to move above 215 would ,uggest thaI an attempl al thaI late-1991 peek IDIght be made. A break below 210 would po.tpone this but would, at the moment, call for nothing worse than another probe into the strong support. The S & P Induslrial. and the similarly-onfigured NYSE Industrials are now close to important tests. Their price patterns both look vulnerable and are-close-to.importanldownside.breakouts.-For-theS&-P-indica\or the-dowoside-breakoul-levelwouJdbe 470 vs. a— close last oighl of 474.81. The NYSE Industrial Average, noW at 274.73 would break down at 272. Given downsIde breskouts, the prospecl for both averages would be a tesl of support, al 460-440 for the Standard and Poor's Index and al 270-260 for the New York Stock Excbange Indicator. If utility averages, as suggested above, bave the best long-term potential patterns, the best immediate relative strengtb i. being shown by financial indicalors. The S & P Financial Index was attsining new high, earlier thi. month above the 35 level. It has since pulled back only modestly from those highs. Moreover the ability to break above 32 early this year strongly suggests that the post-1989 tradiog pattern might have heen a head-and-shoulders base with ultimate targets in the high 40's. When we come to discussing the patterns for those averages covenng secondaJy stocks, some interesting issues arise. Let us begin with the OTC Industrials. 00 February 12th of this year that index reached a high of 741.90. It was, at that point, up 115 from its October, 1990 low. 'This was a rise betwOOD two and three times as greal .. thaI of the S & P 500, which rose only 41 over the ssme period. However, since thaI February high, il bas moved down to a low of 584.80 last Thursday, a fall of 21.18, one whicb, if il had taken place in one of the major averages, we would bave to call a major bear market. The important question i, how much of this recenl weakness is of cycle proportions and how much is simply due to the greater volatility of OTC .tocks. True, the 2O-plus decline so far this year is more than four times as great as the comparable Standard and Poor 500 drop of a bjt under 5. However, even at its low of last week the over-the-counter indicator is ahead 70 from its 1990 low while the Composite is up only about 35. What would be truly useful to know is whether, on a long-term basis, we have ended the long era of underperformaoce by secondarY stocks and embarked upon a cycle-length period of outpcrformance. As our readers know. it IS our own view that this is the case, and that a new era of better action by secondary issues began in 1990. None of this, however, is to deny that wide swings in secondaries will not continue or that such issues will not continue highly wlnerable in weak markets, as has been the case of late. Laslly, il is n….sary to consider the queslion of breadth. As could well be expected, with the DRA strongly outperforming mo,t broader averages, it has also been outperforming all breadth indicators. Our own daily breadth index made its high 00 February 12th–back in that January-March period when most non-DRA av.rages were reaching their peaks.. It reeched a new low and Its maximum divergence from the Dow in mid-April. ThaI mid-April low, intereslingly, was broken lasl week. It i. now 92 days since breadth reacbed its high, and, when the Dow peeked back on June lst, the divergence was 75 days long. Breadth divergences have lasted longer than this, but the index is now a sufficient distance below its high that ultimate confirmation, while not Impossible, seems unlikely. What are we to make of an this We seem, in summary, to be seeing a market which, from a tcchnical point of view, as been growing progressively weaker since early this year-that weakness to some extent being masked by strength in the sort of issues which dominate the Dow. The weakness has not yet extended to the point of being fatal. It is, however, given absence of renewed demand, to become terribly excited about the immediate upside possibilities in today's equity market. ANTIIONY W. TABELL, CMT Dow Jones Induslrial. (1200) 3287.49 DELAAELD, HARVEY, TABELL Standard & Poora 500 (1200) 403.39 Cumulative Index (6/25/92) 7290.48 No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, dlreclly or Indlreclly, an offer or the soliCitation of an offer to buy or sell any security referred to or mentioned 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 olthe statements made herein Any action to be taken by the subscnber should be based on hiS own investigation and Information Delafield, Harvey, Tabelllnc, as a corporation and ItS officers 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 POSition may be different from any views now or herealter 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 III any other Issue Furlher Information on any secUrity menilOned herein IS avaltable on request

Download PDF