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FILE COpy Walston &Co. Members New York Stock Exchange NEW YORK SAN FRANCISCO LOS ANGELES PHILADELPHIA CH,lCAGO ,i TABELL'S MARKET LETTER OFFICES COAST TO COAST AND OVERseAS October 5, 1962 The market is in the middle of a four-month trading area between 525 and 625 in i the Dow-Jones Industrials. There is little technical indication of a move out of this tra- ding area in either direction in the immediate future. The base pattern formed in May- , June indicated a possible advance to 615-650. The lower part of this upside objective was , reached at the August high of 622.02. The downside penetration of the August-September range between 620 and 600 indicates a possible decline to the 580-545 area. This week's' intra-day low was 569.23. The decline has broadened the long-term potential base pat- tern buLproba,plijT-IDore.time is,neededbefore a.broad,mgjor ,upward ,moye Such a move would be indicated 'by the'breadth index shmving better ilc'tion thardhe 'av'er–' ages, and this is not the situation at the moment. However, for the nearer term, the mar ket appeared oversold at the week's low and a rally back to 600-620 is probable. Breadth action must be observed closely if such a rally occurs. The market is in the tedious process of forming a long-term base, During the period, stocks should be bought on weakness. This particularly applies to individual' issues and groups that appear attractive for the longer term on both a fundamental and technical basis. In our opinion, the aluminum issues fall into this category. Late in September, price reductions on some fabricated aluminum products y.'as , announced. This action brought list prices down to the actual level of prices at which fa- bricated goods have sold in recent months. Considering the strong statistical position ,of the industry, this action came as a surprise. August stocks of primary metals in hands of producers were at an 18-month low in August, and current ingot production is esti- mated at 85 – 90 of capacity. Aluminum stocks sold off sharply on the announcement, as shown in the table below May-June Low Au ust i h \Wek9s Low Last Aluminium, Ltd. 17 1/2 /8 20 1/8 Aluminum Co. of Amer. 45 – Aluminum''- '-25- 1\ 51 1/ 8 53 1/4 -. ,' I , 1961-rise They were time haVE decli wei2J; w. et leaders of part 1949 issues and had fantastic'price rises. The in the 1956-1959 period, and since that i '1 his price action is noted in the table below' r.ow-1949 -. Alumimum, t 7 Alummum fAmeI'. 12 . Kaiser Aluminum ,, -Reynolds Metals 2 2 High 1956-59 53 133 70 80 Low-1961 171/2 45 25 20 1/2 Last 20 1/8 531/4 32 1/4 23 7/8 1, The alummum stocks have been in a bear market from three to six ,years. They I have, had a three-wave declme and appear, from a techmcal vi!,!wpoint, to be in the pro- Ii cess of form' ing an accumulation base prior to a major price advance. This hts in with I the fundamental background for the alummum industry. The main difficulty of the past several y'ears has been over-capacity and lowered profit margins. New uses for aluminurr j which could open up new markets and displace other materials in existing markets, could i result m sharply higher sales and earnings in the next five years. We believe this group , is an attractive long-term purchase at present price levels. Aii four issues appeaf' at- I tractive. If we were to plCk one issue, it would be Reynolds Metals, which is part of , our recommended list. – ,,, The mulation aluminums appear to be We believe taking at a relatively advanced a tax loss in issues with stage of a mediocre long-term accuprice potentials – , over the mtermediate-term and SWitching mto aluminums would be a wise investment . I procedure. There are several issues in our recommended list that fall into this category '\ and we adVise switching BendiX, Consohdated Mining, Goodrich, Johns Manville, Pitts- ,, burgh plate Glass, Pullman and United Shoe Machinery into the aluminums. Dow-Jones Dow-Jones Ind. Ralls 586.59 116.36 EDMUND W. TABELL WALSTON & I k lett('r IS not nnd under no to he con'llruP1 as. an offer to. sell or n solICitatIon to buy any lIecurlties referred to herem The informatlon not fL.'; to accuracY or lomplctenes'l and the furnishlnll thereof 1'1 not and under no Circumstances IS to h WI & Co In(' All C'lpre'l'l)nns or n\lInl(m are suhJC'Ct to chanl!e Without notIce Walston & Co, Inc. Bnd Officers, Irectors, c 0 en an y II Rton f nnd may have an u\ter(''It, In the 'If''Curlt.lCl mentioned herein ThiS market letter 1'1 Intended and preaented merely as II genernl. on day to day market new'l and not as B complete nnnlysis Additional InformatIOn With respect to referred to herem \ t r ,t , I !