Tabell’s Market Letter – October 08, 1971

———————————————————————————————- TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON. NEW JERSEY 08540 DIVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE October 8, 1971 The market's initial response to President Nixon's announcement of Phase Two of his economic pro- gram was -;' essentilly;-a'yawn7'tooked'at 'purelyin'terms'oYthe 'averages ;-the'market remains on –aead 1- center, in the lower part of the 880-920 range on the Dow which has characterized it since the rally from the August lows. It is axiomatic that the ultimate penetration of this range will indicate the direc- tion of the next move. Guessing as to the direction of penetrations of this nature is always a risky business. but we admit an inspection of individual patterns leads us to guess that the penetration will be on the upside. In any case, accepting the theory that we are somewhere in the mature stage of an upswing, selecti- vity will become more and more a factor to be reckoned with. We are, therefore, inaugurating this week a review of the technical position of major industrial groups with comments on major stocks within those groups. The review will be continued in subsequent issues of this letter. AEROSPACE – Almost all issues in this group have shown deteriorating relative action recently, but the weakness has returned them to the bottom of potential long-term base formations. They could be thus appropriate for those investors interested in bargain hunting. Boeing Co. (17), McDonnell Douglas Corp. (30) and United Aircraft (32) are all close to downside objectives as is General Dynamics (2I). At the moment, the latter appears to have the broadest upside potential. AIR TRANSPORT – Most stocks in this group corrected sharply in the recent market weakness,' but the bulk of them appear to be about to post major upside reversals. Purchases of almost all major issues appear suitable for risk accounts at this time, with the most attractive being American Airlines (39) with an objective of 50 and Delta Airlines (46) with an initial price target of 65 followed by possible higher levels long term. A L U . ' -ThiS .qrouP.has.been hnwlna infrinr r.tionreltlv.to .the. L.or.o,er. two ve.ars .and I unlike the aerospace issues, no sign of a base.is apparent. We would be inclined to suggest switching issues in this group into stocks with more immediate upside potential. AUTOMOBILES – Potential bases are substantial on all three of the major companies. However, best relative action has been shown by Ford (72), and this is the only one which has broken out of its base formation on the upside. A switch into this issue out of others in the group is probably worth considering AUTO ACCESSORIES – The group as a whole has shown above-average relative action and, at least moder- ately higher objectives are readable in the case of most indiVidual issues. Eaton Corp. (41) has a possi- ble upside target in the mid-60's. BUILDING SUPPLIES – Recent group action has been only average, but a number of attractive chart patterns exist in indiVidual stocks. Among the more interesting issues appear to be Johns Manville (41), u. S. Gypsum (72), Flintkote (31) and Tim Walter Corp. (41). In the air-conditioning area, Carrier (43), which has spent the past two years in a broad potential base formation, appears to be the most interesting. CHEMICALS – Group action has been only average and as might be expected, individual patterns are mixed. Monsanto Co. (52) is probably the most interesting issue in the group with an upside target of 70 and good support just under current levels. CONTAINERS – METAL & GLASS – Relative action has been inferior and the patterns of American Can (33) and Continental Can (34) indicate possible further price vulnerability. We would be inclined to avoid the group at the present time. CONTAINERS – PAPER – By and large the downtrend from the April highs remains in effect. Chart patterns of most individual issues remain unimpressive and we would be inclined to consider switches out of the I-Iindustry. –… -. ..- .. '–';' '- – . – – – . COPPER – Recently having moved to new lows, the stocks afford generous yield. but heavy overhead supply now exists and upside action will probably be slow. COSMETICS – Here again individual patterns are diverse. Avon (98), the most important factor in the industry, has recently held in the 93-106 range and the direction of the breakout will determine the direction of the next move. The potential in both cases is fairly sizable. For the other issues, down- side risk appears limited, but immediate upside potential is unclear. DRUGS – Another instance of widely diverging patterns. Smith Kline & French (55) has just broken out of a major base with a long-term upside objective well above current levels. Merck & Co. (115) and Upjohn Co. (68) must both be rated as strong holds' despite recent moves to new highs. Hospital supply issues posses extremely strang patterns, with American Hospital Supply (41) having the broadest upside potential. Dow-Jones Industrial (12 Noon) 895.08 S&P (12 Noon) 99.46 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL AWT'wn No statement or exprenlon of opinion or any other matter herein contained is, or 15 to be deemed to be, directly or indirectly, on offer or the soliCitation of an offer fa bvy or sell any security rcferTed to Or mentioned The matter 15 presented merely for the convelience of the 5ubscnber While Ne believe the Ourees of our Informohan to be reliable, we In no way repreent or guarantee the accuracy thereof nor of the statements mode herelM Any action 10 be taken by the subscrober should be based on nls own Invesllgatlon and mformatlon Janney Montgomery Scott, Inc, OS a corporation, and Its officers or employees, may now have, or may later toke, poSitions or trades 1M respect to any SI!C;u(1iles mentioned 1M thiS or any future ,ssue, and such poSition may be d,fferent from any views now or hereafter expresed 1M thiS or any other Ilsue Janney Montgomery Scott, Inc, wh,,h is feglstered wilh the SEC as on Investment advisor, may gIVe adVice to 'Is Investment advisory and other customers mdependently of any statements mode In thiS or In any other Issue further mformol1on on any secunty menhoned nerein ,s avollable on request