When Will the Dow's Rally End?

Nov 15, 2006 by Adam C. Powell, Ph.D.

Last night, I asked people mturk.com when they thought the Dow’s current rally would end. I’m currently debating whether or not I should re-invest money in the U.S. in the near future. My overall conclusion from the comments of the responders was that the Dow’s rally will end some time between Black Friday (the Friday of Thanksgiving weekend) and January 1st. I am not sure whether this is true, but this is the general assertion of the anonymous masses.

The following are twenty-five individual predictions about when the rally will end. I asked responders to elaborate on why they thought the rally would end when they predicted. While this is by no means a scientific poll, as the responders were self-selected and compensated, it does provide a sense of what people are thinking.

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“-I think the rally will end within three days of January 2nd 2007.
-I believe the rally will end then because shareholders will be locking in gains using tax year 2007 capital gains.”

“I think the rally will end within three days of December 20th.
The rally will end because stores will have to lower prices to attract Xmas shoppers.”

“I think the Dow rally will deadline when lethargic sales numbers flow in from the vital few days of Post-Thanksgiving shopping. Probably a week to ten days after the numbers trickle in in early December, 2006.”

“I think the rally will end within a week of April 1, 2007.
I think that the rally will end at this time because summer gas prices will go upward again and the “”new”” Congress will place strain on the market prices.”

“I think the rally will end the last week of January. I believe the rally will end because there will be a substantial number of companies that reduce their profit outlook for 2007 when they reporth their 4th quarter 2006 earnings.”

“I believe the rally will end between November 28 thru December 3rd.
I don’t believe retailers are prepared for the majority of consumers who are not spending as much due to higher gas prices and the war in Iraq. I think the recent elections have prompted the rally, but when reality sets in that folks aren’t spending as much for the holidays then the rally will end. ”

“I think that the Dow’s rally will end within a few days of Jan 1, 2007.
I think the rally will end at that time because the markets will realize that the declining national housing market and rising interest rates have caused consumers to spend much less than anticipated.”

“I think the rally will end on November 27th.
I believe the rally will end then because the market will react unfavorably to low consumer spending over Thanksgiving weekend.”

“- I think the rally will end the last week of the year (2006).
– I think the rally will end because end-of-year profit taking after an up year will be enough to cause the Dow to close somewhat lower by December 31.”

“I think the rally will end within five days of March 1st 2007
-I believe the rally will end then because the market will react unfavorably to troops finally being withdraw from Iraq”

“I believed the rally was going to end in September of 2006, prior to the mid-term elections.

This belief was based upon an article about the Stock Market’s election cycle posted at the following link: http://usmarket.seekingalpha.com/article/9034

Didn’t happen… yet.”

“Since July, the Dow Jones Industrial Average rallied from 10,700 to nearly 12,200; a 14% move. Few people doubt that some kind of correction is overdue, but whether it’ll be a soft landing or something more severe is in question. So, my sense is that long equity positions that have been established between July and October need to be protected, even if this is in reaction to a sell-the-news scenario.”

“Rally will end middle of January 2007.
The Fed will need to increase interest rates because of inflation”

“-I think the rally will end the second week of January 2007.
-I believe the rally will end then because by then consumers will no longer be shopping for the holiday season and will cut their spending in order to pay off credit card debt due to holiday ov”

“I think the rally will end the friday after Christmas. The economy has improved slightly and I think that will be reflected in the holiday shopping numbers, but once christmas shopping is over, people will not be shopping, and the dow will drop.
I think that the rally will end shortly after the New Year. There will be enough time that has passed since the Dow passed the 10K milestone and consumers will be painfully aware of their own financial obligations incurred for Christmas and pessimistic about overall lower consumer spending for Christmas.
I think that it will end at the end of the year due to sell offs for tax purposes in 2006 and disapointment over consumer spending over the holiday season.
I believe the raly will end early in the second week of December. I believe the rally will experience a false upswing due to the consumer surges on Black Friday, but will fall unexpectedly, thereafter, causing quite the scare.”

“I believe the rally will end after the Fed meets in December.
I believe the rally will end because the market will realize that the Fed over-tightened with interest rates.”

“This seems like the yearly rally that occurs around the holiday season, albeit about three weeks sooner than usual. Maybe the retailers lowering their goods sooner forthe season has something to do with the speculation.”

“I think we’ll rally until the beginning of the second week of Jan., 2008. Tis time period sales are dismal, everyones broke from the holidays essentially.

Until then I’d say strong week openers are closures are to be expected. Mid week might through a curve on the dip side but the upswing will more than make up for it.”

“I think this years Thanksgiving weekend chopping results will outperform last years and by more than 15% if the price of rude remains steady or dip and the new congress show progress is the order of the day, nice xmas gifts for the land.”

“The rally will end in February.

The Fed is more concerned about a spike in inflation than a recession — that is a mistake. As consumers start spending less and saving more thanks to the (slow-motion) housing bust, the Christmas season will be disappointing, but not enough to set off a recession — that will happen when the business sector starts spending less on physical capital, which will become clear early next year. That coupled with rising political anxiety related to Iraq and gridlock, and of course an increase in interest rates, will end the rally.”

“I think the DOW’s rally will end on or about Dec 8th.

I think this because there will be enough bad data from same-store sales to conclude the economy slowed due to an overzealous Fed tightening policy.”

“I believe the rally will end midway through December”

“I think the rally will end after the January 5th, 2006. I believe the rally will end then because consumer spending will dramatically decrease and energy costs will increase due to inclemental weather.”

“I think the rally will end just before December 31st. I feel this way because investors will be getting nervous and begin to take profits after such a long run of record highs. They will wait until the end of the year to get retail stocks as high as possible before a selloff.”