Tabell’s Market Letter – May 29, 1992

TABELL'S MARKET LETTER 5 VAUGHN DRIVE, eN 5209, PRINCETON, NEW JERSEY 08543-5209 MEMBER NATIONAL ASSOCIATION OF SECURITIES DEALERS, INC (609) 987-2300 May 29, 1992 The frigid weather that has been affiictmg the Northeast all thiS week may well cause us to forget the fact that summer is -….. close at hand. The so-lIed .summer rally i, thereforeconce more a topIc-for discussion. Thus wereproduce below the customary table which appears annually in this space at this time of the year, covering 95 years of market history since the Dow was first computed in 1897. One MOnth Periods (1897-1992) ——– ———- ———— End Month Advances Declines Average Chg. ——— ——– ——– ————– January 61 34 1.12 February 47 48 -0.20 March 57 39 0.72 April 52 44 0.90 May 48 47 -0.19 June 49 46 0.62 July 59 36 1.50 August 63 31 1. 64 September 36 58 -1. 33 October 51 43 -0.10 November 56 38 0.67 December. 69 26 1.48 Two Month Periods, (1897-1992) — – – ——– – – ——.—– — Advances Declines Average Chg. ——– ——– ——- —— 62 33 2.62 55 40 0.93 47 49 0.44 57 39 1. 66 51 44 0.78 49 46 0.39 58 37 2.11 63 31 3.41 54 40 0.26 41 53 -1. 38 55 39 0.63 66 29 2.03 TOTAL 648 490 0.57 658 480 1.16 As the table indicates, of the 1138 months since 1897, 648—or 57— have been advancmg months, and 490—or 43—- haveshowed declines. Thus,.the normaLexpectatlOn fo,-any giv.enjnonth.wouldJle 52,53adyances and 39,40declines. SiE!ilar figures can be adduced for two-month periods. . From the data above, we have been able to extract four patterns of a seasonal nature which seem to be statistically sigmficant. The one showing the most significance is, oddly enough, the least known, that being the tendency toward a market decline in the month of September. Since 57 of all months since 1897 have been rising ones, the expectation would be a plurality of advances over declines. However, precisely the opposite IS the case for September which, in 94 years, has produced 58 declines and only 36 advances With an average drop for the month of 1.33 . The probability of such a pattern be10g due to random chance IS, standard statistical tests tell us, less than 1 in IOoo. The next most significant pattern has been the year-end rally, illustrated by 69 rismg Decembers m 95 years. Our readers know that we have pubhshed an annual comment on thiS phenomenon around December or January of each year. Another seasonal manifestation, which We have demonstrated based on data since 1926, has been the fact that the direction m which the market moves in November has appeared to be a moderately successful predictor of the market's direction for the follOWing year. We confess to knowing no reason whatsoever why this should be the case, but it is, nonetheless, so. Of the four seasonal phenomena, the least significant is the summer rally, which is due to be examined at this juncture. As the table shows, the 59 advances and 36 declines for July are marginally better than one would expect. August shows an even greater aberration. The percentage advances for July and August, along with that for the two-month period ending in August, are the largest figures 10 the table, although December-January performance is close. DespIte these figures, standard significance tests suggest that the summer rally IS a less reliable phenomenon than the others noted above. It has been even less reliable recently, especially in July. Despite the fact that 1982-1992 has. overall, been one of the better decades 10 stock-market history, half of the ten Julys since 1982 have been down months. For last year three of the four seasonal indicators remained true to form July, 1991 saw a better than loo-pOlOt rise lD the Dow. and August extended the rally September, as might have been expected, produced a mild decline. In addition, the 1991-92 year-end rally not only amved on schedule but remains intact, the Average. at its recent high, standing 18.65 above its December low WIthout an interverung correction of as much as 4. Only the forecast normally produced by the month of November has proved to be off base so far. November of last year saw a fairly sharp decline lD the DJIA, and as noted above, that mdlcator, If not the rest of the market, has rallied since then We stress once more that the summer rally is the least reliable of the seasonal tendencies we have been able to discover but there IS little doubt that summer action does have some tendency to be better than normal. That tendency must, this year, be coupled With the pattern of a strong second balf occumng in an electIon year. There are a number of reasons for skeptiCism regarding the current level of stock prices, but seasonal tendencies, it must be admitted, do not reenforce them. ANTHONY W. TABELL, CMT Dow Jones Industrials (1200) 3416.84 DELAFIELD, HARVEY, TABELL Standard & Poors 500 (12 00) 418.18 Cumulative Index (5/28/92) 7371.01 No statement or expressIon of opinion or any other matter herein contained IS, or IS to be deemed to be, directly or Indirectly. an offeror the soliCitation of an offerlO buyer sell any security referred to Or menl!Oned The matler IS presented merely for the convenience of the subSCriber While we beheve the sources of our Information to be reliable we In no way represent or guaranlee the accuracy thereof norof the statements made herem Any action to be taken by the subSCriber should be based on hiS own mvestlgallon and mformatlon Delafield, Harvey, Tabelllnc, as a corporation and Its officers or employees, may now have, or may later take, posrtlons or trades In respect to any securrtles mentioned 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, Tabell Inc, which IS registered With the SEC as an Investment adVISor, may give adVice to rts Investment adVISOry and o1her customers Independently of any statements made in thiS or in any other Issue Further Information on any security menlloned herein IS available on request