Tabell’s Market Letter – March 27, 1981

TABELL'S MARKET LETTER' 909 STATE ROAD, PRINCETON. NEW JERSEY 081540 DiVISION OF MEMBER NEW YORK STOCK EXCHANGE, INC MEMBER AMERICAN STOCK eXCHANGE ./ March 27, 1981 Come on now. Does anyone really, after the last three weeks, still believe that the stock market is a-,random walk The denotlement, 0f..course7'isthat',-on.Weanesday-,-March25;cthe Dow-Jones' ., Industrial Average closed at 1015.22, its highest level since 1973, and a point decisively above the trading range in which it had been locked since last August. It is, however, the ritual dance it engaged in in the course of reaching that point which is of interest to the mnrket observer. . The level of about 1000 on the Dow was of particular interest this time aro\md since, in addition to being an easily-remembered approximation of high points going back some 15 years, it was also the level of recent widely-repeated oracular predictions. The Dow, therefore, did not simply embrace and ravish the 1000 level. It flirted with it coyly over a period of no less than nine trading days, until such time as the final consummation took place on Wednesday. The story really begins back on January 6 when the Dow continued the year-end rally to achieve a new closing high of 1004.69. The twenty-point break on record volume the next day was followed by two weeks of lateral action around the mid-960's. An eventual low was reached at 932.25 on Feb- ruary 2, and tested on February 13. From that low, a bit over a month ago, a recovery set in which, by the beginning of March, had brought the Dow back to the mid-960 level. The question, of course, was whether or not all this was preparation for yet another assault on 1000. To gsin the full flavor of what happened subsequently, one is forced to resort to hourly readings. On Thursday, March 12, having spent two weeks at the 960- 970 level, the Dow posted a 22-point gsin, closing at its highest level of the day at 989.92. The following day saw strength at the opening bell which took the average,at its initial figure, to within an ace of 1000 at 997.93. This first assault was, predictably, turned back, and the market was six points below its opening figure at noon. An other attempt took place between noon and one o'clock, with a level above 995 being reached. This assault also was repulsed, and the final close (possibly suggesting that Friday the thirteenth was an -'- – inauspiciousAay-for- an-assault-on.a-new-highwasfourpointslowerAhanThur.sday!s .—— Monday, March 16 saw another attack with renewed vigor. After moving sideways until one o'clock, the market rallied sharply and closed at 1002.79, breaching the four-digit barrier but re- msining below the January 6 high. Tuesday's trading saw only slight progress (1004.86 at two o'clock was the high), followed by late afternoon weakness which led to a 10-point decline. That decline extended to a close of 986.58 on Thursday, March 19. Last Friday witnessed yet another attempt. The average was ahead 10 points to 996.13 at three o'clock, but lost a goodly portion of that gsin in the final hour. Then on Monday, the attempt was revewed and 1002.16 was reached at two o'clock, followed by weakness between two and three. Final- hour strength led to a close of 1004.23, 46/100 of a point below the January 6 high. By 11 AM on Tuesday, we were at 1009.37, but whatever was out there at the 1000 level had not yet given up. The two O'clock figure was below 1000, and the final close was 996.13. Finally on Wednesday, after reaching a low at noon of 998.56, the Dow demonstrated persistent strength throughout the entire day, and finally reached the 1015.22 figure mentioned above. We ask our readers' indulgence for this flight into recent history and are symphathetic to the com- plaint that it does nothing to answer the question, What now. Actually, with the recent strength, the framework for a plausible short-term scenario exists. We think that the market's ability to move decisively above the 1000 level suggests that the more optimistic interpretation of the February-March base we have been alluding to in the last few issues of this letter is the correct one. This would suggest a short-term target in the vicinity of 1050. Interestingly enough, the more broadly-based indices have, in recent days, formed a pattern which somewhat parallels that of the Dow. The S.& P 50 for instance, now possesses a possible upside target of 144-146. Both these figures, if achieved, would make the trading range of August, 1980-March, 1981 a matter of historical artifact. The clear question would then center around'how far the move begun in March of last year was likely to carry. As we have suggested in the past, readings of as high as 1200 on the Dow are possible. Agsinst this optimistic interpretation must be set the present maturity of the cycle which began some three years ago now in March, 1978. We are not yet ready to consign the 1000 level entirely to past history. Indeed, as we write this, it is agsin being approached, this time from above, in what must be considered a normal correction following the Wednesday rally. We would suggest, however, that the prospect for a move substantially above that figure is now better than it has been in some time. Dow-Jones Industrials (1200 PM) 1003.96 S & P Composite (1200 PM) 136.18 Cumulative Index (3/26/81) 1127.92 AWTsla ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No stctement or expression of opinion or any olher motter herein contotned IS, or IS to be deemed to be, directly or ,ndirectly, en offer or Ihe 501,;110110,\ of on offer 10 bvy or sell ony security referred 10 or mentioned The moiler 15 presenlC!d merely for the conYef'lenCE of the subscriber While VIe beheve the sources of our Informo han to be reliable, we In no way represent or guarantee the accuracy thereof nor -of the statements mude herein Any action to be laken by Ihe subSCriber should be based on 1'115 own Invesllgohon and Information Janney Montgomery Seoll, Inc, as a corporation, and Its officers or employees, may now have, or may laler toke, poslhons or trades In respect to any secufltles mentioned In thiS or any future Iue, and such posItion may be different from any views now or hereafter expressed In thiS or any other Issue Janney Montgomery Scali, Inc, which 1 registered With the SEC as on Investment adVisor, may give adVice to lts Investment advlso!), and olhel customers Independently of ony statements mode In thiS or In any other Issue Further information on ony security mentioned herein IS aVOIloble on request