Tabell’s Market Letter – November 22, 1968

;-; Le Walston &Co. —–Inc —– Members New York Stock Exchange and Other Principal Stock and Commodity Exchanges OVER 100 OFFICES COAST TO COAST AND OVERSEAS TABEll'S MARKET lETTER November 22, 1968 For the past month, with a short digression for the discussion of election prospects, this letter has devoted itself to consideration of the outlook for individual industry groups. It was, actually, a good period to pick for such a discussion. When the review began, on Oct 0- ber 18th, the Dow-Jones Industrials closed at 967.49 vs, Friday's close of 967.06, so that, presumably, individual stock selection, rather than the market, has been the most importan investment factor over the period. Nonetheless, it appears wise at this juncture to back up and once more to take a look at the prospects for the overall equity market climate. The events which are central to any technical discussion of today's stock market began it..seemBtO-llS, soe3 .lL2-.mqnths .ago—-1o….bepre dse ,onAugust9th.. t day, the 0-, Jones Industrial Average posted an intra-day low of 863. 33, over 100 points below its pres- ent level. The Standard & Poor's 500 was at 96, 11 vs. the Friday close of 106. 30. The next 40 trading days were spent in a rather dynamic rally with the Dow advancing to an intra day peak of 974.27 and the Standard & Poor's to 105.78. This was in turn f0110wed by an 8- day decline to low figures of 936.54 and 101. 85 respectively. Subsequently, in the past 11 trading days an advance has ensued bringing the Dow back to its former high and the Standar & Poor's 500 to a level somewhat above its peak of late October. It is rather easy, there- fore, to divide the market, since last August, into three separate phases — the first, a long and powerful rally, the second a minor decline, and the third a rally which has wiped out that decline entirely. It is interesting to try to relate these three phases to world news at the time they were taking place. During the first phase, for example, the were (1) the im- proving prospect for a Vietnam settlement, and (2) the inc as 'l\W'ola ility of the election of Mr. Nixon, By the end of October, Mr. HumPhre8ic e s ng S gth in the polls was becoming apparent, and the market thus declined, r ng is' a-day low the day before the election. The news surrounding the thirdlW,ei n e interesting in light of the ability of the market to rally in the face of a ti . c Vietnam outlook and a rather – -1 ;–arguablethat-ba-sed-orr-the-experien of the past two weeks, other and the international money pic- ture as the subject of investor p 0 s portant factor is the 40-day August-October rally. In it,. the Dow-Jo I v ge broke decisively out of the trading range which had contained it since th I dIe of 1967. As we have stated before, the upside implications of this base plamly pOI t t nsiderably higher levels, i. e., 1300 over the long term and a possible nearer-term to be reached, say, in the first half of 1969. This long-term pic- ture, therefore, dictates for the majority of investors, it seems to us, a rather fully in- vested position with concentration on the unexploited groups which have been discussed in this space previously. From a shorter-term point of view, however, attention must shift from the August- October rally fo the pre-election decline and the technician must ask himself whether this modest drop, on the order of 3 1/2, was sufficient to correct the almost 13 advance whic preceded it. In consideration of this question, there are a number of factors to be taken into account, including the extent of the oversold position at the November low, and the size of the base subsequently formed. It is, in this case, necessary to note that the market had not, by most measurements, reached an oversold position three weeks ago and that the base formed u'sat that level was small. It is these factors that leaif to some doubt about the market's . ability to continue a short-term rally from these levels without undergomg a further correct ionary process of some sort. It is necessary to emphasize again that the truly relevant factor at this time is the long-term outlook and not the questionable short-term prospect which is useful in this instance only as a rough guide to timing. We thmk that even during a short-term decline in- dividual issues could out-perform the market to a sufficient degree to make their ,purchase at current levels profitable. Any weakness which might take place, therefore, must be re- garded as a purchase opportunity. Dow-Jones Ind. 967. 06 Dow-Jones Rails 272.46 ANTHONY W. TABELL WALSTON & CO. INC. AWTamb This market letter I,ll pubhshed for your conv.emence and InformAtion nnd IS not an offel to sell or 0\ soitcltation to buy an' securitles ..hscussed. The m. formation wall obtfuned from sources we believe to be reliable. but we d(t not lrunrantee Its nccurncy WalBton & Co. Inc And Its officers, directors or emDloyees may have an mterest in or purchase and sell the referred to heren'. .I