Tabell’s Market Letter – February 01, 1991

TABELL'S MARKET LETTER 600 ALEXANDER ROAD, CN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS. INC (609) 987-2300 February I, 1991 — – Wediscussedf in..-our… prevJous …two-issues, theignificance .. oL. theJ.OO-point-ILralJ-Y-….which – occurred a fortnight ago, pointing out that seven of the eight last bear-market bottoms had been characterized by similar rames. Wednesday and Thursday's followthrough, with the Dow up another 74 points, reinforces the original message and suggests, that, though the market is obviously overbought for the short-term, the path of least resistance is upward. Problems exist, however, when one tries to gauge the extent of any potential upmove. This can be documented by inspection of individual technical patterns for any representative set of investment -grade stocks. In the table below, we present some technical statistics on one such representative set, the 30 components of the Dow Jones Industrial Average. — — stock ———————– Allied-Signal Corp Alumlnu Co of Arner ,American Express American Tel Tel Bethlehem Steel Corp Boeing Co Chevron Corp Coca Cola Co Du Pont De Nemours Eastman Kodak Co Exxon corp ,General Electric Co General Motors Corp Goodyear Tlre Rubber – —- -InteITBnati-ona-i-'–Paper ,Mcdonalds Corp Merck Co Inc Minnesota Mlnlng Mfg Navistar lnt'l Phllip Mords Cos Pnmerica Corp Procter & Gamble Sears Roebuck Co Texaco Inc u S X Corp Union Carblde Corp United Technolo9ies Westinghouse Elect Woolworth Corporatlon Price -B–r-e-a-k-o-ut Supply 29 34-36 65 64-70 22 24 30-37 32 40-44 14 17-18 48 50 55-60 70 76-78 48 37 39 38-41 42 44 46-50 52 63 66-70 35 36-40 20 127 135 150-165 60 28 31 30-l4 91 84 3 4-4 1/2 56 26 27-29 77 82-86 29 34-37 58 62 60-65 29 ll-34 19 20 21-23 48 50 54-60 28 30 33-38 31 30-34 Objective ——–33-40 66 33 34 15 53-72 82 60-66 50 70 66 80 39 25 260 61 46 100 98-150 3 1/2 60 25 100 38 73 21 68 34 potj!ntial Gain ————-13.8\-37.9\ 0.0- 7.7\ 4.5\-68.2\ 6.3\-37.5\ 7.1\-28.6\ 2.1\-50.0\ 8.6-17.1\ 25.0-37.5 2.7\-35.1 2.4\-66.7\ 26.9 4.8-27.0\ 2.9\-11.4\ 25.0\ 5.5\-104.7\ 1-7\ 7.1-64.3 9.9\ 16.7-78.6 16 7\-50.0 7.1 0.0\- l.8 6.5\-29.9\ 17.2-31.0\ 3.4-25.9\ 6.9-17.2 0.0-52.6 2.1-41.'1\ 3.6-17.9\ 0.0- 9.7\ .- – The first problem is that while almost all the Dow components have formed some sort of base since last fall, 10 of the 30 have not yet broken out of these bases. The point at which these ten would post upside breakouts is shown in the second column above. Those stocks with no figure shown have already broken out on the upside. There exist two technical factors Which, given current market conditions, are relevant to the assessment of a stock's intermediate-term potential. The first of these is overhead supply. Such supply, from 1989 -90 tops, exists in all but six of the issues, and its level is shown in the third column. In some cases the supply is massive. In others, it is relatively small. The second factor is the extent to which a base has formed. In a few cases. there now exists a sufficiently wide base to'suggest that .he supply may be penetrated. in many, the upside targets and the supply coincide. The final column attempts to assess the potential percentage gain for each stock, using first conserV'ative, and then optimistic, interpretations. Under the conservative interpretation, it is assumed that breakouts will not occur and the lowest figure for the supply or the upside objective will be attained. The bullish projection assumes breakouts by all issues and uses the widest possible objective. It is possible, using the figures shown, to project upside targets for the Dow. Using the less optimistic scenario yields a possible target of 2,955. The more optimistic one yields an upside potential a good deal higher—as much as 3,700. Experience, however, shows such longer-term projections should be discounted by about 10, Which would produce a target in the 3,300' s. Analysis of upside momentum as the advance continues should give some idea of the ultimate projection. ANTHONY W. TAB ELL DELAFIELD, HARVEY, TABELL INC. Dow Jones Industrials (12 00) 2728.46 S & P 500 (12 00) 341.36 Cumulative Index (1/31/91) 4968.26 No stalementar expression of opinion or any other matter herem contained IS, or IS to be deemed to be, directly or Indirectly, an offeror the soliCitation of an offerlo buy or sell any security referred to or menlJOned The matler IS presented merely for the convenience of the subsCriber While we beheve the sources of our information to be rehable, we In no way represent or guarantee the accuracy thereof nor of the statements made herein Any action to be taken by the subsCriber should be based on hiS own Investigation and informatIOn Delafield, Harvey, labell Inc, as a corporation and Its officers or employees. may now have, or may later lake, posrl1ons or trades In respect to any securities mentioned In thiS or any future Issue, and such poSItion may be different from any views nowor hereafter expressed In thiS or any other Issue Delafield, Harvey, Tabell Inc, which 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 secunty mentloned herein IS available on request