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TABELL'S MARKET LEnER lS WALL STREET. NEW YORK 5, N. Y. Digby 4.04141 The signs of at least a temporary top, which we have been mentioning in our letters of the last two weeks, have increased. Last week the market broke several uptrend lines. This was true not only on the price trend graphs but also on the buying power gauges. Selling pressure also decreas to break a downtrend line. However, the decline was caused mainly by a drup in the buying urge rather than a heavy increase of selling pressure. It woulu appear that the irst phase of the advance, a rise of app mately 22 pOints from 160.62 to 182.67 in two months, has been completed. ,Just how far a, declining phase will carry is problematical. A normal te'lIHJ.,- cal correction of one-third to one-half of the 22 point advance would bris the industrial average 'back to the 175-171,area. However, the averages or individual issues have not yst built up a sufficiently broad distribution area to indicate such a decline at this stage. Furthermore, there is a fair resistance area at 178-176. It would be necessary for a broader top to be built up before a decline of such degree is indicated. ' The declining phase may carry down through middle or late September, interrupted by sporadic rally attempts to the lower 180 level. Such a re- action, or rather broad consolidation, would improve the technical pattern considerably. As I have mentioned before, while many issues have already built strong base patterns, there are a great many other issues that have not yet built up a broad enough potential to sustain a strong upward move. Most issues of this type are in the groups that have shown most unfavorable action over the past few months, such as the steels and the rails. While these issues most likely reached their lows in June., their potential accu- mulation patterns appear incomplete. A month or so of reaction or conso- lidation may complete the formation. If this happens, these issues should be watched closely as they may be the leaders of the next and more dynamic phase of the advance and take the place of the more or less defensive type of issues that have been the leaders of the first phase. All of the foregoing refers to the relatively minor or near inter- mediate trend of the next month or so. The longer term pattern shows no signs of jeakening and in fact is strengthening itself during the present consolidation or reactionary period. If the advice of the past three weeks has been followed, ';roups issues marked as shoViing relatively unfavorable action have been sold on strength into the 180-183 area. Retention of issues showing favorable action has been advised as I doubt if these issues will have re than a nominal correction'even in the event of a decline into the lower 170's in the next few weeks. Would not advise repurchases until the industrial average declines to the 175-174 level or until a clearer indication of the extent of the decline is given. While many individual issues continue to show favorable action, I am omitting the list until such a time as the action of the list ca,) be observed in relation to the current decline in the averages. August 26, 1949 EDMUND W. TABELL WALSTON, HOFFMAN & GOODWIN Thl. memorandum Is no' to b. coMtnled a. fin oHer or solicitation of offers to bur or 11 any I.curltles. From tim. to time Walston, Hoffman & Goodwin rnay haye an Int.rest In some or all of the securities mentioned h.,.ln, The foreqolnQ meterlal has been prepared by us 8S ill matter of Informetlon only. It I. bated upon Informetlon bellev.d rellebl. but not n.ceslarlly compl…. Is not quaranteed lIS accurete or final, and I. not Intended to foreclo Independent Inquiry.