Bulls Bid for Another Romp

On the weak side, chipmaker Intel(INTC Quote) has lost more than 20% this year. Home Depot(HD Quote) has fallen 15%, and retail giant Wal-Mart(WMT Quote) has dropped 4.4%.

While nothing is guaranteed, if recent history is any guide, the odds favor the long side for what remains of 2006. For instance, through August 2005, the Dow lost 301 points, or 2.8%, and the Nasdaq gave back 23 points, or 1%. The S&P outperformed both, gaining 8 points, or 0.7%.

All three then came on strong for the final third of last year. Both the Dow and the S&P 500 gained 2.3%, and the Nasdaq advanced 2.5%. In fact, in the 10 years prior, the Dow rose eight times between Labor Day and New Year's Eve. During those climbs, it surged by an average of nearly 705 points.

That doesn't mean it's been entirely smooth sailing.

"As we enter September, we can't help but review its dismal historical record," warns Ken Tower, chief market strategist with CyberTrader. "The month of September has risen just 39% of the time during the past 108 years. September's average return of [negative 1.35%] is again by far the weakest return. Clearly, this is a dangerous month for bulls."

Robert Pavlik, chief investment officer with Oaktree Asset Management, wouldn't be surprised to see a decline moving into mid-September and on into October, but he also expects "a pickup in stock prices as we enter November in anticipation of another fourth-quarter rally. However, a rally will be dependent on the economic news, namely inflation remaining in check and economic growth moderating."