Tabell’s Market Letter – August 13, 1982

TABELL'S MARKET LETTER – 909 STATE ROAD. PRINCETON, NEW JERSEY 08540 DIVllilON OF MEMBER NEW YORK STOCK EXCHANGe, INC MEMBER AMERICA.N STOCK EXCHANGe August 13, 1982 The stock market remains in the same dreary bind in which it has found itself now for almost a year. It will be recalled that back on September 25, 1981, the Dow posted what was then a six-month bear-market low at 824.01. That low was followed by a moderately decent rally which continued into December, and held for almost six months until it was finally broken in late February, 1982. However, the new low produced little further action On the downsfde, . and the lowest point reached was 795.47 on March 8. An even less impressive rally followed, and by June the averages were again flirting with new lows. Finally, a close of 788.62 was chalked up on June 18. This third downward thrust was followed by a modest move into the low 830's in July. Now the Dow finds itself skidding to yet a fourth new low, with the lowest figure reached so far being the close of 776.92 on August 12. Thus we have a rather unique ll-month-Iong configuration of four separate lows, with each successive low separated from the previous one by at least a two-month interval. The last of these lows is lower than the first by something less than 6. This pattern, extending over such a protracted period of time, is an event without a great deal of precedent in contemporary stock-market history. The only roughly similar period that comes to mind is the late 1940's prior to the Junc,1949 low. Even in that instance, however, the swings were considerably wider and the rallying phses more dynamic. Since none of the declines in question have produced any follow-through, there has tend- ed to be a complete absence of those sorts of deeply oversold conditions which would suggest an 1–t-imminent–'-mar-k-et–t-uM-w-ln-OIle-4oI!ID.-Or–another J at -various -point S I the market–has ageJl.j;'Qo…,….-… exhibit some of the characteristics of major bear-market bottoms, but I at no time has it managed ……. to display a great number of them in particularly noticeable form. We displayed a chart back last June that suggested the market had remained in the low end of its recent trading range for a length of time comparable to that exhibited at past market lows, and we suggested then that this signified the presence of preconditions for a market reversal, although not necessarily that such a reversal was imminent. This week another statistic began to show numbers which, while not encouraging for the short term, tend to suggest that a low of some importance could be fairly close at hand. The statistic in question is the short-term trading index, a number widely available on quotation equipment, which consists of the ratio of two ratios, the advance-decline ratio divided by the upside-downside volume ratio. High figures tend to suggest a high degree of downside momentum and, when this figure is averaged over 10 days, a level of over 1.5 signifies unusual- ly high intensity. On August 6, this level was exceeded for only the fifth time since 1964. The other four occasions have all been associated with bottoms of some importance, the 1966 low, the 1970 Ibw, the 1974 low, and the Silver Thursday decline in 1980. A caveat should be notediin that, on three of the four previous occasions, the ultimate market low took place significantly later and at noticably lower levels than that which existed the first day the index moved above 1. 5. It occurred, for example, on September 7, 1966 and the final Dow low was a month later and 33 points lower. Likewise, the first occurrence in 1970 was on May 4 at 714 on the Dow, prior to a final low of 631 on May 26. In 1974 the first occurrence was on September 30, a week before and 23 points higher than the October low, which was later tested in December. Only in 1980 was the first occurrence of the 1. 5 reading at around the same timeasthe-ult-imate bottom. – – — '. — Based on these figures lower prices over the next month would not be t,,rribly surpris- ing. However, short-term-trading-index action would suggest that the culminatIOn of such a process could be a fairly important turning point. AWTrs Dow-Jones Industrials (12 00 p. m. ) 781. 49 S & P Composite (12 00 p. m.) 102.93 Cumulative Index (8/12/82) 1038,08 ANTHONY W. TABELL DELAFIELD, HARVEY, TABELL No statement or expression of opinion or any other matter herein conh;lIned IS, or IS to be deemed to be, d,rectly or indirectly, an offer or the soliCitation of on offer to buy or sell any security referred to or mentioned The mollcr '5 presented merely for the convenlenct of the subSCriber While e believe the sources of our ,nformatlon 10 be reliable, we In no way represent or guarantee thc accuracy thereof nor of the statements mode herein Any action to be token by the subSCriber should be based on tliS own InvestigaTion and Informallon Janney Montgomery Scali, Inc, 05 a corporation, and Its officers or employees, may now have, or may later toke, pOSitiOns or trades In respect to any secufltles mentioned In thIS or any future luue, cnd such position may be different from any VIIWS now or hereafter e)'pressed '1'1 thiS or any other luu!;! 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