Have we already enjoyed the Year End Rally?

Monday, November 27, 2006 | 10:01 AM

A NYT column last weekend asked: Have we already enjoyed the Year End Rally? Today's action makes that query all the more relevant -- especially in light  of last week's Dollar whackage:

Here's the ubiquitous excerpt:

"THE stock market has had a great run over the last few months, but as the holiday season begins, some analysts are worrying that the traditional year-end rally on Wall Street may have already come and nearly gone.

Mary Ann Bartels, technical research analyst at Merrill Lynch, wondered in a note to investors whether the tendency for stocks to climb in the last couple of months of the year had been rescheduled this year for September and October.

“We think yes,” she wrote. She then acknowleged feeling torn between what her charts have told her and what the calendar and history have led her to expect.

“It is not our favored stance to be more toward the bear camp looking for a cyclical correction of 8 to 10 percent, but all of the market indicators suggest this is the more likely scenario over the coming weeks,” Ms. Bartels said. “What is surprising is that these readings are occurring at this time of year. Most years see a bullish year-end rally.”

She highlighted several exceptions that prove the rule, including three years in the 1990s when the Standard & Poor’s 500-stock index lost at least 6 percent at some point during the last two months of the year. What signs suggest that 2006 will play out as those three years — 1991, 1994 and 1996 — did?

Trading volume has shrunk, something that often precedes a price decline, she noted, and several sentiment indicators, including opinion surveys of investment advisers and measures of market volatility, show the sort of complacency that typically occurs near market tops.

Interesting stuff . . .

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UPDATE: November 27, 2006 10:43am

CNBC's Bob Pisani quotes several unnamed traders who have said that in light of the dollar drop, overseas investors are repatriating some cash, locking in their profits for the year, and eliminating additional currency risk . . . 

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Source:
This Party May End Before It Starts
CONRAD DE AENLLE
NYTimes, November 19, 2006
http://www.nytimes.com/2006/11/19/business/yourmoney/19mark.html

Monday, November 27, 2006 | 10:01 AM | Permalink | Comments (36) | TrackBack (0)
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Comments

As far as sentiment, the latest AAII shows there are still people fighting this trend. Bulls decreased, while bears increased.

A few things come to mind...

1) The fastest and hardest corrections come during bull markets.

2) It's not how we open, it's how we close.

3) Tops are a process.

We still have the Fed meeting in another 2 weeks. There will no doubt be another "Fed is done" rally.

From what levels, we shall see...

Posted by: Michael C. | Nov 27, 2006 10:56:07 AM

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