Tabell’s Market Letter – September 11, 1970

p ,.. ' ,p P(…… – . ….I \ . ., , … ……., ' , , ri L. -. '0 .- f.) . 909 STI' E ROI\D PRINceTON New JEHSEY D1Vl310U Of p..CMOLR NEW YOfH' S'OCI C,(CHANGE MLMBER STOCK r.XCHANGC September 11, 1970 As market technicians, we are, along with the majOlity of our fraternity, firmly committed to the principle of relative strength. This principle slates, in its simplest form, that above-average indIvidual s to,;- ilion .te09 s)o , relative action, it is necEssary to consider a fairly extended time p2riod. All too often, we find, in- vestors'confuse short-term flurries with real relative strength lmprovemenL As an illustration of this, let us compare the mar!et action over n.e past couple of years of three stocks along with the S&P SOO-Stock I;'ldex. We think the three issues chosen are each representative of a broad class of issues whose market action has been Similar. The f,rst table below shows the pnGe' of the three issues at vanous points over the past two years, and the s8cond gives the percentage change over various time periods. Price At 1.1I1g Temco 12/68 Hiqh 11 0 1/70 Hiqh 24 5/70 Low 7 8/10 Low 11-/2 Recent High 15-7/8 Phillips Xerox S&P 500 39 95 108.37 25 116 . 93.46 20 70 69.29 26 65 74.13 28-3/8 81-7/8 83.78 ' Chanoe from 12/68-1/70 lL70-5/70 5L70-8L70 8L70 -Date 5/70 -Date IDO -Date 10i 8-Q.ate LIng Temeo -78 – 71 64 38 127 -34 -86 Philllps -36 -20 30 -19 42 4 -27 Xerox -22 -40 -7 26 17 -29 -14 8&1' 500 -14 -26 7 13 21 -10 -23 In the first phase of the bear mdrket, from December, 1968 through the recovery high in January, I 1970, Xerox was by far the best-performing issue, actually moving ahead m the face of a severe down- 'rcmco-swIng7..0wnereus -dr-op-ped '-alm6-st three tilnes ak' lrluch -as-1he ald Lirig- — 1' disaster, losing three-quarters of its value. In the bear market's second phase, the S&'P dropped 25 from its early 1970 high. Ling Temco continued on its downward spiral with ,mother 70 loss. However, Xerox's relative action deteriorated as the stock showed a 40 loss, and that of Phillips improved WIth the decline beIng less than that of the general market. From the May 10VJ, prices recovered sharply in June and July dnd then sank to a s(condary bottom in August. Between these two dates Ling Temco suddenly became the star performer, rebounding 65. Phillips, the best performer on the previous decline, scored a 30 advance while Xerox contInued to move lower. Phillips' action, of course, was a tYPlCal example of releUve strength during a bear market carrying over into the initial stages of the next upswing while the Xerox weakness is an instance of the opposite case. Ling Temco, on the other hand,demonstrdtes another phenomenon, the sharp re- bound from a deep-oversold condition. Th difficult problem in identifying moves such as this one is timing. The bounce from the May low in Ling Temco was highly dY;'lamic, but, if the buyer had been a bit early, say by a week, nis purchase would have shown a Joss rather than 11 profit. For the most recent period, from the August lows to the highs of last week, Ling Tenlco has continued to show above- average action, Xerox has come to hfe with a 26 advance, while Phillips has moved essentially side- ways. Now, however, let us compare the action of the three stocks over longer time periods ending with recent prices. Going back to the May Jow, Ling Temco, for what it's worth, is the star performer. this semi-spurious comparison, however, the reJative strength of Philllps, with an advance better than twice that of the Index, becomes clearly apparent; ..c – ,, ' Phillips' strength is equally apparent if one goes back to January. Since then, the stock has scored a 14 advance vs. a 0 decline in the market and drops three times as great In the oiher tv.'o issues. However, over the whole cycle, Xerox has shown the superior action with the smallest bearmarket loss of the three issues. In summary I Xerox, the best peliormjng issue over the very long tefftl, began to show detcriordting etlan as early as January and has reversed this trend only over the past three weeks. Phillips'reliltive (1CilOn, on the other hand, has been improving since early this year and anI'! minor evidence of deterior- ation in recent weeks is evident. And Ling Temco, despite its recent great 5t1'011gth, still shows extrelllD– ly poor actlOn on a long ..term basis. lIntll further relative. improvement in issues such as these last two takes place, our inclinution is to view those stocks with patterns such as Phillips as being the most 'Jttractive investment vehicles. DOW-Jones Tnd. (1100 a.m.) 762.12 8&P (jl00 a.m.) 02.49 ANTHONY \IV. TIIBELL DrLIIfICLD, HARVey, TIIBILL AW1'.mn . – – , M !. ItI' 'II 1 'f'''' ,I ,'t ,,,.,, or ,'1 ,,'I'r ttl'! I\,.'-,n (on' lit,' Ii I ,), 'J L.. ,I, I- – ; , ,I.,II) 1,0' IIv cr IU',P ,1)'. (1\ P, , '. f Ir I, ,,1.11011 0 til f,' I,,,,.II' II) I 0' 'il 01'1 'r H' I,' rl 0 P' n Il m,j lIr' ,('lll)r IS plf'''lll …1 mCld, j'Jt rh,' , Jlwr 110( of rh. \','h,I'l It (' bI,v' Ill' If , ,d!I')U t) I, ,,,'!1 1- \ ' ,., I,D Jo' I 'r '111111 ..,, Ih, t,((''''''V 11.,1 f II,,, orn,J htli'm AllY '1 10 1)1' ll, II I Y fhe .,,1,1 j, 1,C!..- J 'II I,,; , 'n, 'I' 1,'wL ,)' ,t, 1 tl' (', ' ,\,1, r., vr I, ….IIl '1'.01 ,r,krrtnlllfl U,(lI 'Y, ,v, Co, I'll I'td P. (,wi 0' ,ny .11 f .J! rt In 1'1 ,., 'mnrd m IIs or lilY I', l (!Illi ,,,I'Oll tl\ 'Y Il' d,f/f''' nl It …, lnl \1,,, .It titf't 1' ,' IU 11,,\, 't'l .-11t,., .. 'I. , …. , …. 10,,1, '\ \IIHI II,,' ',It; ,-. I(lVtJ'!olllllt U,I'II(lr. 'H(11 n,f! nd\',rf' In , 101 ,I 1',,' 'II, \ n, lInn-'- I 'oily cd '111'0' ,,1'''''111, ,d.' !I' 11,. ,f rl!1l '''h'.f ….. .