Tabell’s Market Letter – May 21, 1976

TABELL'S MARKET LETTER 909 STATE ROAD, PRINCETON, NEW JERSEY 08540 DIVISION OF MEMBER NEW VORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK EXCHANGE May 21, 1976 By now everyone is almost agonizingly familiar with the lateral trading range that has con- tained the Dow-Jones Industrial Average since late February following its meteoric rise in the first two tnonthsol'the-y,-ar' Likewrs e anyone wnotl'aS'been read ing -any -farm'Of'techllifalffia rKetcOiiiiiient'isi' – aware of the fact that, throughout this period, the Dow has been outperforming most breadth indices, indicating below-average performance by the broad range of stocks. We conducted, this week, an in- vestigation to ascertain whether this underperformance extended to the American Stock Exchange and the Over-The-Counter market as well, and the general conclusion is that this is, indeed, the case. While American and Over-The-Counter issues underperformed the Dow in the early phase of the advance, they moved with it and even ahead of it on into mid-February. Since that time, both Amex and OTC indices have been performing less well than the Dow ,and as measured by breadth, the average ASE issue has been underperforming the average NYSE issue. Finally, interestingly enough, there is some suggestion that this trend, at least as far as the Amex is concerned, may now be reversing itself. The following table shows some relevant market statistics for selected dates since the Decem- ber 5 low. The first column shows the DJIA, the second, the American Stock Exchange Market Value Index and the third, the ratio of the latter to the former. Obviously, when this statistic is rising, it means the Amex index is outperforming the Dow and vice versa. The next two columns are breadth indices for the New York and American Stock Exchanges starting from an identical base. The last two columns give the NASDAQ OTC Composite Index a'nd its ratio to the Dow. ASE Ratio Ratio Mkt. Val. ASE/ NYSE ASE OTC OTC/ Date DlIA Index DnA Breadth Breadth Compo DII-A 12/5/75 818.80 82.40 .1006 780.62 781.20 74.72 .0913 12/26/75 859.81 82.58 .0960 785.46 780.58 77.13 .0897 ….'.22.,//'22''45''/!7i766………S99-99734-…55,572–;;11;00-55-..-12.15.;.1;;;.1050-588- 826.98 804.09 82'67'4'5-803-9'2 91. 73 9'27'09 .0923 0920—– 2/26/76 978.83 104.17 .1064 823.57 802.66 91.45 .0934 3/5/76 972.92 103.65 .1065 820.99 800.54 89.47 .0920 3/11/76 1003.31 105.30 .1050. 823.75 801.23 91.21 .0909 3/24/76 1009.21 104.71 .1038 822.56 799.17 90.93 .0901 4/21/76 1011.02 103.47 .1023 820.02 795.14 90.77 .0898 5/12/76 1005.67 105.01 .1044 818.70 794.10 90.64 .0901 5/13/76 1001.10 105.48 .1054 817.95 793.85 90.22 .0901 5/19/76 988.90 104.67 .1058 815.91 792.44 89.25 .0903 Scanning down the dates reveals some interesting facts. Both the American and OTC markets underperformed the Dow on the initial phase of the rise as shown by the declining ratios between Decem- ber 5 and December 26. Indeed, in that period the Amex index hardly moved at all. When we come to the three days at the end of February, however, some interesting changes have taken place. First of all, both the ratios have improved dramatically, indicating relatively stronger moves on the part of secondary issues. NYSE breadth reached its high for the year on February 24 as did American Stock Exchange breadth. A glance down both columns shows the failure of breadth on either exchange to post new peaks after February. This suggests that the average stock on both exchanges has been underperforming senior issues, since the capital-weighted Market Value Index on the ASE, like the Dow, reflects largely the action of larger companies. The OTC index reached its high on February 25,and that high has not yet been dupli- cated. Likewise, the ratio of the OTC index to the Dow reached its peak on the next day. A few days later,on March 5,the ratio of the Amex index to the Dow reached a peak at .1065, a high that, likewise, has not been duplicated since then. As the table shows, we have seen a series of successive highs on the -Dow unaccompanied by ne'; peaks -on any of theotner ind'icators- This 'remained -true until MayI3'- – ;..- when, as the table shows, the ASE index moved into new high territory, if only marginally, while the Dow remained below its high. At .10S8,its ratio to the Dow on May 19 was just about the highest it had been since back on March 5. It is yet too early to tell whether this recent awakening on the Amex is the precursor of any wave of interest in secondary issues or just a flash in the pan. It is also worthy of note that it has not to date been confirmed with rising breadth action. Nonetheless, we think the figures suggest a total ab- sence of any sort of speculative activity,and,while speculative activity is not the only precursor of mar- ket tops, it is generally the precursor of the more dangerous sort of decline. Dow-Jones Industrials (1200 p.m.) 994.21 S & P Compo (1200 p.m.) 101.73 ANTHONYW. TABELL DELAFIEW, HARVEY, TAB ELL Cumulative Index (5/20/76) 601.66 AWT/jb No statement or e)(prCS!on of opinion or ony other matter kerCH) contolned 15, or IS 10 be deemed fa be, directly or Indirectly, on oHer or Ihe soliCItation of on offer 10 buy or sell ony secutlly referred fo or mentroned The matler rs presented merely for the conver,enc& of the subscrrber Whrle we belreve the sources of our mforma- tron to be relrable, we m no way represent or guorantee the accuracy thereof nor of the statements mude herein Any action to be taken by the subscriber should be bosed on hIS own investigation and InformatIon lonney Montgomery Sco't, tnc , os a corporation, end Its offIcers or employees, moy now hove, or may later toke, posItions or trades tn respect to any securitIes mentIoned en thIS or any future Issue, and such posItron may be dIfferent Irom any vIews now or hereafter expressed In thIS or any other Issue lonney Montgomery Scoll, Inc, whIch IS regIstered WIth the SEC as an enveslment adVIsor, may gIve odvlce 10 ,ts Investment adVISOry ond other customers Independently of any statements made In thIS or In any ather Issue hrrther Informalron on cny securIty mentIoned herein IS avcllable on request