Does the Dow Jones have one last Rally left in it?

I have a friend that lost his job, and has the majority of his money tied up in the stock market. He suggests that he's going to leave it in there until he needs it, and also feels that the market can easily go back up.

I've suggested to him that the Stock Market should have one last rally before Christmas because retailers will get a small economic impact on the market. And then after that, we can see DOW hanging out in the 7,000 range, and then eventually the 6,000 range in the first few months of 2009... and then Lord forbid that some kind of war happens (or any other disaster / crisis).

Is this bad advice? I feel like he needs to get that money out because it is not secure, and he is also going to struggle to find a job the next year or so.

He's replied to me that He's afraid the moment he takes out his money the Market will go up to 10,000 or 11,000 points... I just don't think this can happen anytime in the near future or even the next few years. He's also claimed that the stock market is unpredictable and it can rebound at anytime... (my reply: The stock market is very predictable right now... It's going Down and staying there for awhile!)

So I have made it very clear to him... look dude, you had your chance on the 889 point rally we saw last week, I hope you see another rally in the near future and If I were you, the moment I see the market go up 600 or 700 points get out while you can.

I believe we will see sustained losses in the market over a period of 2-12 months,there will be future short rallies,but long term the market will bottom.

[edit on 6-11-2008 by all2human]

Banking on a rally that may or may not happen is not the best financial plan. It really depends on your friend's retirement age and his need for liquid funds right now. If the need is immediate or will be next year, then why take a chance and not have it happen. If he has a few years or more to go before considering retirement or needing his funds then yeah wait it out.

Now I understand you're looking for a rally before the year is up and in my personal opinion, I believe we will get one before the year over, not the rip roaring 1000 point or more rally in a singular session that some are wishing for, but a slower, over two to three sessions one will probably come before the year is over.

As for a 10,000 point or more rally in the very near future, that is not very likely this year or next year imo.

it will go up and down, but i think in general down is the direction

i was told if barrack obama won us presidency that the stock would forever be down...

this being that, even on msnbc and stock market channels barrack was exclusively talked down to like he was a joke, and no economist there for the most part on the floor of the market was for his plans that i know of or taht i've observed on market channels

and check it out the day after he was elected i think it was 4 or 5 hundred points down and now at 1230pm central time it's down about 4 hundred points

i'm not saying it's early enough to see a pattern but maybe my friend was right.

Right now, guessing where and when to divest from the markets is econmic Russian roulette as I don't think anyone outside of the traders right on the floor know from one minute to the next what's going to happen.

We've had fluctuations of hundreds of points on the DOW in minutes . . .

Scary.

reply to post by indigothefish


I believe yesterday's downturn was planned and expected based on the outcome of the election. Traders, Wall Streeters, whatever name you want to lump them under and the Business Media basically have been programming "us" and everyone in the industry to expect a down day after the election if Obama won, because his tax/economic plan does not benefit those with money (not saying that it's true or false) but that is the perception aka "mustard seed" that was planted weeks ago.

My opinion is this: Whether or not your friend should get out depends entirely on when he thinks he's going to need his money. I firmly believe the market will rebound, but I don't think it'll be any time soon. If he needs his money in the next couple of years, I'd suggest getting out now. If he's still 10 - 20 years from retirement, I think he'd be fine leaving it there.

Or, he could get out now, put the money in something more stable for the short term, then get back in when the market is closer to the floor. Only problem is nobody knows where or when the bottom will actually occur. I'd wager though, that we won't see it for at least 10-12 months.

reply to post by Doomsday 2029


It's kinda hard to answer your question with the information given. Your friend has money tied up in the stock market, but you don't say if your friend is savvy enough to day trade or if it is just a 401K type of investment.

Also we have no idea exactly where your friend's money is invested.

If your friend knows about the market, market patterns, elliott wave theory, etc he can still make some tidy sums of money playing the market, but that is on the assumption that he has physical control over his investment (day trader)

If your friend's money is left to the control of others, then your friend needs to very diligent in watching what happens to his money and where it goes.

We are on a down slope and we have not reached true bottom yet. It's a global condition, not just isolated to the US.

Once we reach the bottom, how things are handled will determine how long we stay there.

Our market could have been going through a correction IF the Bailout had not happened and insolvent companies were left to go bankrupt (as they should have) But all over the globe we have bailouts happening, TPTB are doing everything possible to get the most money THEY can get out of the markets before they completely implode.

bottom line is this, if your friend has control over his investment and knows what he's doing, then stay with it, there is still money to be made in shorts, Comex, Forex, etc. If not, he can watch his money disappear for a while longer then hope he gets it back in 10-12 yrs.

Otherwise, I'd say get out of the markets.

From Roubini's site RGE Monitor (an opinion I happen to agree with)

"And in the meanwhile the brief bear market sucker’s rally in the equity market has lost its steam and U.S. and global equities are starting to plunge again. As I argued for the last few weeks this was a bear market rally and markets could not defy the laws of gravity: a slew of ugly and worse than expected macro news, earnings news and financial news was bound to take a toll on equities and other risky assets. And now, after a brief rally markets are starting to plunge again. For 2009 the consensus estimates for earnings are delusional: current consensus estimates are that S&P 500 earnings per share (EPS) will be $90 in 2009 up 15% from 2008. Such estimates are outright silly and delusional. If EPS fall – as most likely – to a level of $60 then with a multiple (P/E ratio) of 12 the S&P500 index could fall to 720, i.e. 20% below current levels; if the P/E falls to 10 – as possible in a severe recession, the S&P could be down to 600 or 35% below current levels. And in a very severe recession one cannot exclude that the EPS could fall as low as $50 in 2009 dragging the S&P500 index to as low as 500. So, even based on fundamentals and valuations, there are significant downside risks to U.S. equities."

JK

Originally posted by GoalPoster
Right now, guessing where and when to divest from the markets is econmic Russian roulette

That's the answer for your friend right there, Doomsday.

Will we see another rally? If history is to be trusted, we could get a Santa rally before the year is out.
The truth of the matter is, though, that the current market is too volatile to rely on history alone. He can't bet on a Santa rally, he can't count on one for his income. If it doesn't happen, he's going to be in a world of trouble.

It's very difficult to give any advice, and I'm not a financial advisor - but if this is the money he plans to live on during what he expects to be a prolonged job hunt, then the advice you gave him may well be the best he can do. Another option might be for him to partially divest on a rally (if we get a good one) and leave as much as he can in hopes of a much higher DJIA down the road. This is, of course, assuming that this is the money he will require to keep himself fed and in his home; if he wants to go buy a new TV or an iPhone, then disregard anything I've said.

I'm sorry to hear about your friend's job situation, by the way.

Like I said last week, these fluctuations between huge loss days and then a couple of big gaining days, floowed by more losses and, ultimately, a market lower than it was when the last down day ended reminds me very much of someone shaking an almost empty Ketchup bottle. There's an effort right now to shake the money loose from the average schmuck day trader and 401K holder. These bounces are enticements to get any holdouts who still haven't said "Oh what the hell, I stand to make a fortune if this spike represents a true, sustained rebound?" go ahead and invest whatever they have so Wall Street can claim it and add it to their ever growing mass grave of middle class held wealth.

Looks like I was right... He should of taken my advice.

He had an opportunity to get out at 9600

now it's at 7600, and I seriously doubt we will see any kind of recovery any time soon.

There is a special place in Hell

....reserved for popular financial advisers like Suzie Orman. With each successive break in this downward spiraling market, pundits of the fast food financial ilk, continue to advise staying in our 401K, or even increasing our allocations...buy & hold for that inevitable 'bottom' and bull market rally. If your friend is heeding this type of financial counsel, I hope his situation includes an extremely long time horizon. Beyond the monetary damage, consider the debilitating emotional effect of booking an increasing negative return on investment

Traders often chide; A long term trade is simply a short term trade gone bad. It's obvious from your post that your friend is not a trader, but he finds himself in a common emotional bind...similar to the upside-down swing trader that neglected to employ protective stops. By orders of magnitude, fear is a greater thief than a quiver-full of Bernie Madoff'.

Will the market eventually rally?

In nominal terms, it's practically a given imo...but at what cost?

As I referenced in a post last night...in five years, the German [Weimar] stock market rallied from 126 in 1918..to..26,890,000 in 1923...as the currency declined to zero (4 Trillion marks per US dollar).

GL


Forbes 1998: Sizzling Suzie