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SAN FRANCISCO, CALIF. NEW YORK, N. Y. BAKER.SFIELD BEVERLY HILLS EAST ORANGE, N. J. LONG BEACH . MODESTO OAKLAND SAN DIEGO SAN JOSE TABELL'S MARKET LETTER PHILADELPHIA, PA. LOS ANGELES, CALIF. EUREKA. FRESNO HAGERSTOWN, MD. HARRISBURG, PA PASADENA RIVERSI DE SACRAMENTO SANTA ANA STOCKTON VALLEJO 35 WAll STREET. NEW YORK 5. N. Y. Digby 4-'1141 After reacting to 186.98 on Tuesday, a new low since the recovery high of 193.63 reached on November .2nd, the industrial average turned around sharply and by Friday had rtraced almost the entire ten-day decline of six and a half pOints in three days. The intra-day high on ,. Friday was 193.97, a new high since the June low. The quick recovery ha weakened the technical pattern. The short term indicator gauge was quite close to reaching an overbought condition at Friday's close. Further strength or even continued holding above 192 would give a short term sell signal within the next few days. The advance may carry a bit further- but would be extremely cautious of following strength at this point. Would be inclined to capture trading profits and await a more favorable opportunitv for repurchase. This advice,of course, applies only to trading accounts willing to try to take advantage of the 5 up and down minor trends of the market. The long term trend cf the -r.arket is definitely higher in my opinion and I expect a penetration of the 1946 high of 213.36 some time in 1950. In the meantime, the market Jould work somewhat lower during the next month. I would not expect the possible decline to be severe. I doubt,even, if it more than approaches the strong 184-180 support level. In fact, the expected action might be more aptly described as an irregular market. This period of the year of late November and early December usually results in markets of that type wjth various cross-currents of tax selling, profit-taking, and switching. 110uld take advantage of such possible irregularity or weakness to add to holdings in recommended issues, but would be cautious of following trength. ,. A word should be said Qbout the rails. The industrials closed at 193.41 and the raUs at 48.75. The last time the industrial average ., was at this point, j II mid-1948, the rail average IaS approximately tWelve or thirteen points hIgher at 62-63. The rail aVErage has not even been able to reach the early 1949 hIgh of 54. '3. This, of course, has been exceedingly bad technical action. However, te rail pattern is slowly irrroving. A long head and shoulders bottom appears to be forming with a left shoulder in t 11e ;'7-52 rcnge and a head at the June low of 41. The right shoulder apears to be formine now. Such a formation should result in substantially higher levels when the pattern is completed. Some individual rajl issues, such as chicago,Rock Island and Illinois Central, seem to be 1.1 a more advanced phase of the pattern than oth,ers. Vlould not be surprised 'co see he ra ,ls take bver the leadership at some time in the not too distant futUre. In fact, selected rails could move '.head while industrials undergo an irregular consolidation . l November 18, 1949 EDMUND W. TABELL WALSTON, HCFFMAN &; GOODWIN .. 'Xafri!iThis memorandum Is not haye lin interest in lome to or be construed as ,lin all,of the socurities f omfefenrh,oo,rnesdolhiCeritea,ti,o' nT0e 0ffofeeng,otrbnteed liS IIahccsunYrbateeGuor'TrfeiPnslallreFd/rlnobmdy time to time Walston, Hoffman & Goodwin may us as a matter of information only. It is based is not Intended to foreclose independent Inquiry upon Information believed rehllble but not nocnarJ V cemp e e, I no gu ' . . / .\ ., !