Mark Hulbert: The stock market is setting itself up for a possibly monster year-end rally

CHAPEL HILL, N.C. — Good news: The stock market is dropping. The Dow Jones Industrial Average, while ending Thursday well off its early triple-digit decline, fell for the sixth time in nine days to close at its lowest level in 2½ weeks.

Why is that good news?

Because by dropping in October, the stock market creates the preconditions for a significant rally through the end of the year. This year appears to be quite closely following at least the beginnings of that script.

How big a rally? The Dow DJIA, +0.22% over the last 120 years has gained an average of 6.8% from its lowest October close through Dec.

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