Tabell’s Market Letter – May 25, 1990

Tabell’s Market Letter – May 25, 1990

Tabell's Market Letter - May 25, 1990
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– – – – – – – – ———— TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC 1609) 987-2300 May 25, 1990 1—-'letterAsexopurrescSolilnelaCgtulei,OhRoopbee-rttn Sritmfipekimnasr. KentotweoduJlaasato-wsoemeket. nwfnegheaXdC,itsiefvtegndaOyns tpnraiotvr,e written ry a … -I afternoon, it did, the Dow rising 60 points on the highest volume of 1990 so far. The following Monday saw a newall-time high, and this high was repeatedly extended through the 2856.26 peak achieved on Wednesday. We had, frankly, not expected this outcome. We had been drawing attention to the paradoxical situation in which market momentum was demonstrably poor. yet indicators of sentiment were highly bullish and investable cash abounded. The latter forces prevailed over the former. and the result is now history. It is tempting to call the past fortnight's action a buying panic and to compare it to similar manifestations in August 1982 and August 1984, Technical action was indeed similar in the prior instances—a long period of dullness, a week of slight improvement, and then the upside explosion. However, we think the comparison is facile. Technical events must be judged in context, and the aforementioned two cases occurred after protracted downswings. The current instance takes place following a two-and-a-ha1f-year bull market. The present situation may, we think, be placed in context by noting that, following a two-year upswing, there was an interval, or gap, of 91 trading days between the high of January 2 and the one of May 14. Gaps of this length or longer in the context of an ongoing bull market are fairly rare occurrences, having occurred only 19 times in the past 65 years. The 19 instances are outlined in the table below. FIRST HIGH SUBSEOUENT DROP O.te OJ1A End Oate , NEXT HIGH Dote Gap DJIA ULTIMATE HIGH Date Days DJIA I FEB 11 1926 162.31 MAR 30 1926 -17 AU, 3 1926 140 163.40 SEP 3 1929 919 361.17 133 AUG 14 1926 166.64 OCT 19 1926 -13 APR 21 1927 203 166.66 SEP 3 1929 705 3Bl.17 129 ..,……,…-….,..-1- I-..,…,………,,S EP..,.719J2709.-93,NO V,-.,.j-,j.9 32,,,27…MA Yd O,o-193191-6-c-76HARI09.a71-14-7-J.9 440-t\ 40..,.. JUL 16 133 106.67 OCT 21 1933 -23 JAN 30 1934 155 106.99 MAR 10 1937 934 194.40 76 FEB 5 1934 110.74 JUL 20 1934 27 MA, 4 1935 373 110.63 MAR 10 1937 555 194.40 75 JUL 14 1943 145.62 NOV 30 1943 -11 JUN 15 1944 277 145.66 MAY 29 1946 '566 212.50' 46 JUL 10 1944 150,50 SEP 14 1944 – 5 DEC 9 1944 122 151.31 MAY 29 1946 425 212.50 40 FEB 6 1947 164.49 HAi 17 1947 -12 JUL 11 1947 119 164.77 JUN 15 1946 264 193.16 5 JUL 24 1947 166.85 MAR 16 1948 -11 MAl 14 1948 231 186.60 JUN 15 1946 23 193.16 2 SEP 13 1951 276.37 NOV 24 1951 . 7 JUL 15 1952 240 276.76 JAN 5 1953 117 293.79' 6 AUG 3 1959 676.10 SEP 22 1959 . 9 DEC 31 1959 103 679.36 DEC 13 1961 491 734.91 6 JAN 5 1960 665.47 OCT 25 1960 -17 APR 10 1961 317 692.06 OEC 13 1961 171 734.91 6 MAY 14 1965 939.62 JUN 2& 1965 -II ocr 11 1965 102 942.65 FEB 9 1966 64 995.15 6 SEP 25 1967 943.06 MAR 21 1966 -12 OCT 3 1966 240 949.47 DEC 3 1966 35 965.21 4 APR 2B 1971 950.62 NOV 23 1971 16 APR 5 1972 237 954.55 JAN 11 1973 193 1051.70 10 JUL 15 1975 661.61 OCT 1 1975 11 JAN 6 1976 120 690.62 SEP 21 1976 160 1014.79 14 SEP 6 1976 907.74 APR 21 1980 -16 JUL 17 1960 466 915.10 APR 27 19&1 195 1024.05 12 NOV 29 1963 1267.20 JUL 24 1964 -16 JAN 29 1965 294 1292.62 AUG 25 1967 649 2722.42 111 JAN 2 19902810.15 JAN 30 1990 10 HAY 14 1990 91 2821.53 1 1 1 1 1 11 11 Some explanation is probably required. The first two columns show the new bull-market high which preceded the long gap. The next two show the date of the subsequent low and the percentage decline to that low. Following this is the date of the subsequent new high, the number of days in the gap between the two highs, and the closing 'Dow on that date. Finally, the last three columns give the date of the ultimate bull-market high, the number of days later it occurred, the final Dow, and the percentage advance of the terminal move. Some obvious facts can be noted. It was, first of all, common throughout the 1920's and 1930's for long gaps between highs to take place at the mid-stages of bull markets, and these gaps were regularly. followed ,bysubstantial,…advances.Simi1ar . action ..occurred inAhe last case of such a gap where, following the 1983-84 hiatus, the Dow posted a 111 adVance. The common pattern for the 1950's, howeve1, was quite different. For the ten cases between February 1947 and April 1981, the average rise in the Dow from the new high after the gap, the date analogous to May 18, was 7.3. Some of these rises were of long duration, but their percentage advance tended to be quite short. Our inclination is to believe that this pattern will hold in the present case. An upside objective of 3100 is readable, this being a rise of about 10 from the most recent high. Such an outcome would be consistent with most of the history of the post-World War II period. Dow Jones Industrials (12 00) S & P 500 (1200) Cumulative Index (5/24190) AWTebh 2833.02 355.92 4918.31 ANTHONY W. TAB ELL DELAFIELD, HARVEY, TAB ELL INC. No slatement or expression 01 oplmon Or any other matter herein ccntalned IS, or IS to be deemed to be, directly or Indirectly, an offer or the solicitation of an offer to buy or sell any security referred to or mentioned The matter IS presenlM merely for the convenience of the subSCriber 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 herem Any action to be taken by the subscriber should be based on hiS own Invesllgal10n and Information De!alield, Harvey, Tabelllnc, as a corporation and lIs officers or employees, may now have, or may later take, poslllons or trades In respect to any securlbes menlloned In thiS or any future Issue, and such position may be different from any views now or hereafter expressed m thiS or any other Issue Delafield, Harvey. Tabelllnc, which IS registered With the SEC as an Investment advisor, may gIVe adVice to Its Investment adVISOry and other customers mdependently of any statements made In thiS or '1'1 any other Issue Further mformatlOn on any secuflty menllOned herem IS available on request

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