Tabell’s Market Letter – April 27, 1990

, .. 11' ISUE ILIL ' S lMilalRlIEV ILIEV'U'IER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC /609) 9B7-2300 April 27, 1990 Last week's most 1.6' market event must have been the penetration to a new closing .v au LOr .., ,vn , inruesdaY'stradmg-;-rniS–was ,theJowesCleveFattaiiied' bhlyutthn-;eUmr'n',,min Borne SIX weeks, at whlch time, In early March, the short-term rally to recent highs was underway. Along with the Average's drop, new lows were being posted by both daily and weekly breadth indicators. There was modest recovery in Wednesday's and Thursday's trading, but the basic pattern remains unchanged. It is, perhaps, appropriate at this time to review that pattern and state our own attitude regarding the market, which remains, as has been the case for some months, not particularly sanguine. We are not, it should be noted, apocalyptic bears. We are aware of the widely advertised prospects for financial crisis implicit in an illiquid junk bond market, failed S & L's, and collapsing real estate prices. It must be emphasized that, presently at least, there is no prospect for financial collspse built into today's technical market structure. On the other hand, the market looks—well, tired. It locks, in short, like a market which has risen better than 60 over a two-year period and is now b'eginning to show increasingly narrow leadership. It locks like a market whose most conspicuous recent technical feature is a potential double top. It looks like a market, in other words, where caution is probably the best policy .32 310. 3co 290 7, 1.0 2'8 III The above point-and-figure chart of the Standard and Poor's 500 shows, we think, the reason why we are cautious today. Despite the necessary difficutiy in identifying particular dates, we still think the point-and-figure format is the best outline of today's market pattern. Up until Point 1 on the chart, in August of last year, a major uptrend remained in effect, and there appeared to be little or nothing to worry about. At that point, however, breadth peaked, the market began to move laterally, and we had, at Point 2, the rather weird events of October 9 – 13 where a new high was followed by a collapse to new lows. Neither the decline nor the subsequent recovery was, in our view, predictable. but they contributed, nonetheless, to an emerging overall pattern. The year-end rally just barely attained a new.high at Point,,3,-in the process reaching the upside objective of the base at A-B. There followed the collapse to new lows at 322 in January, shown at Point 4. What we had by that point was a potential top, as shown at C-D, with a downside objective in the mid-280's. A new base, at E-F, then formed, but the upside target, involving a test of the old high, has, to date at least, not yet been attained. Instead, the index collided with the heavy overhead supply at 340-350 and has now pulled back. Indeed, there seems to exist, with the formation at G-H, the possibility of a test of January's low. Now, it is not impossible for new strength to emerge, and indeed a potential base in, roughly, the 320-340 area could provide the platform for a new advance. Were such improvement to take place, we would hope to be able to recognize it early enough to take advantage thereof. Until then, however. we continue to advocate a cautious market stance. ANTHONY W. TABELL DELAFIELD, HARVEY, TAB ELL INC. Dow Jones Industrials (12 00) 2658.55 S & P 500 (12 00) 331.31 Cumulative Index (4/26/90) 4737.17 No statement or expression of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or indirectly, an offer orthe sollcltallOn of an offer to buy or sell any security referred to or mentioned The matter IS presented merely for the convenience of the subscnber While we beheve the sources of our informatIOn to be reliable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subscnber should be based on hiS own Investlgallon and InformallOn Delafield, Harvey, Tabelllnc, as a corporation and ItS officers or employees, may now have, or may later take, POSitions or trades In respect to any secuntles menlloned In thiS or any future Issue, and such pOSition may be dlflerenl from any views now or hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabellinc , 'Nhlch IS registered With the SEC as an Investment adVisor, may give adVice to ItS Investment adVISory and other customers Independently of any statements made In thiS or In any other Issue Further InformatIOn on any security menlloned herein IS available on request –