What's The Next Catalyst?
by Charles B. Carlson, CFA
Dow Theory Forecasts

The stock market's recent rally has been fueled primarily by decent corporate profits in the third quarter.

I used the word "decent," mind you. These are not great earnings by any stretch of the imagination. Still, earnings aren't as bad as some analysts had expected. And on Wall Street, no bad news is often good news for stocks.

Of course, we are rapidly approaching the end of the earnings-reporting season, which begs the question - What is the next catalyst to hit stocks?

Certainly there will be ample economic data to be reported over the next month or two, and that will affect stocks on a short-term basis. Also, the Fed interest-rate cut and the Republican victory in the recent elections could be positive catalysts.

If I were betting, however, I'd say the next major catalyst will have something to do with the Iraq situation, and I'm guessing the news will be bullish.

For that reason, I think this current rally has some legs - certainly to the 9000 level and perhaps the 9500 level if some bullish developments come out concerning Iraq.

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