Tabell’s Market Letter – March 22, 1968

Walston &Co. – lnc – – – – Members New York Stock Exchange and Other Principal Stock and Commodity Exchange. OVER 100 OFFICES COAST TO COAST AND OVERSEAS TABELL'S MARKET LETTER March 22, 1968 Last week's market traversed old ground. Monday's rally, in response to the two- tier gold system, brought the Dow to al). intra-day high of 854.25, just about as high as it had been since early February. Unfortunately, the rally lasted only one and one-half hours, and most of the rest of the week was spent drifting lower. Although peace news late Friday cause a small gain, by the end of the week the Dow had retraced all the advance from the March 14th gold-crisis low. From a technical point of view it must be admitted that all these fluctuations have some significance. For 28 trading days, ever since February 12th, the market has held in a range bounded roughly by 820 trading ranges exist in all the other popular indices. 'As long'as this sort of thing goes on, the more significant these trading ranges become and if they do, indeed, represent accumulation, the results could be moderately spectacular. The Dow, for example, now has a potential upside objective of somewhere between 870 and 880, and similar objectives exist in other indices. Still, this trading range can be viewed only as a potential base formation. So far, as any observer can easily see, the rallies have been unimpressive,and some major change in the investment climate will probably be necessary to get the market off of dead center. In a period where political, monetary and economic surprises are occurring almost daily, it would not be too hard for such a change to occur. What we are again raising here, of course, is the unanswered question as to whethe the present downswing will bottom out with the classic climax-selling sequence, or will smother itself out in the current frustrating trading that there is any answer as yet, and we suspect, moreover, that it is rathe at 'Qi.he me for most invest- ors to take protective steps. The investor who has 0 i so ,high-flyer he bought last Summer, is hardly h'Olped by being told his stock a 0 end. Of this obvious fact he is all too painfully aware. As we said t e vestment policy at this stage calls for being a buyer of common stocks it we ss, i. e. if the selling climax se- – — quefice develops;-b'r-over tim-e; mately penetrated on the As to what stoc to b, r otential-'-ba'se-breadens and-i-s-ulti- \0iYO' r at the moment none of the ambiguity that be- clouds the future cour e . uring the desultory markets that have character- ized 1968 so far, s and industrial groups have constantly fought the de- cline — either staun y ef . to go down, or, in some cases, even moving ahead. In- cludedin this group are..;-.,.,pparels, banks, finance companies, grocers, home furnishings, retailers, savings and loans, buildings and textiles. The obvious relative strength being shown by groups of this type should impress even the most unsophisticated market observer. The counter-argument, of course, is that all the groups mentioned above are so-called defensive issues, and such issues always go down less in a poor market. Admittedly, the argument runs, growth stocks are performing poorly now, but as soon as th market turns, these magical favorites of 1967 will again make everybody wealthy. This is a delightful theory which unfortunately betrays a total ignorance of the behavior of markets. One of the most dependable rules of market behavior is that stocks and groups whic act the best during a decline generally turn out to be leaders in the next upswing. This is true whatever label (i. e. defensive, growth, cyclical) the investment faddists of the place on them. ReynoldsTolacco,Jor ,just of a defensive stock as it is to- day when it dramatically outperformed the market during the 1956-57 decline. It promptly demonstrated its defensive qualities by going from 13 to 90 over the next four years, Bur- lington Industries was cyclical when it was outperforming the market in the 1962 break. The ensuingcycle took the stock from 9 1/2 to 50. We think, in other words, that the invest or who ignores the continuing above-average performance of the groups mentioned above, an instead seeks bargains in depressed 1967 favorites, does so at his peril. He is likely to be missing some of the most exciting investment opportunities of recent years. Dow-Jones Ind. 826. 05 Dow-Jones Rails 218. 54 ANTHONY W. TABELL WALSTON & CO, INC, AWTamb This market letter 18 published for YOUr convemence And Information and IS not an offer to sell or 1\ solieltation to buY a.n) securities t.hBCUB8ed The In formation was obtained from sources we beheve to be l('llable, we do not guarRntee its accuracy. Walston & Co Inc. and its officers. dl;E!Ctors 0; employeee may have an mterest In or pUl'chase and sell the seCUTlUI.S referred to helem.