By Nicholas Santiago on February 23rd, 2010 4:32pm Eastern Time
The markets have whipped around during the month of February in violent fashion. Since the recent January high in SPDR Trust (NYSE:SPY) at 115.00 the SPDR Trust traded as low as 104.58 on February 5th, 2010. On that day the markets reversed on high volume and all the major stock indexes such as the Diamonds Trust (NYSE:DIA) and Powershares QQQ Trust (Nasdaq:QQQQ) have rallied ever since. Today the market is selling off as the SPDR Trust (NYSE:SPY) is trading down nearly 1.30 cents to 109.85 on the day.
What changed on February 5th, 2010 to get the markets bullish again? The same problems in Europe all remain in tact to this very day. The situation with Greece has not been resolved yet and a half dozen more European nations are lining up with their own set of debt problems. The term PIIGS nations(Portugal, Ireland, Italy, Greece, and Spain) have become a household name and are just a few of the nations in trouble. There are a couple more countries in Europe that are in trouble such as Iceland, and Lithuania that can be added to the mix.
Then we have the China situation. The Chinese government has raised the bank reserves for Chinese banks by a ½ point. They have also cut their exposure to U.S. debt as Japan has now become the largest holder of U.S. Treasuries.
Where do we go from here? One can only suspect that this year will remain a traders market. The so called 'hope rally' of 2009 is over. If a stock wants to trade higher it needs to do more than beat the 2008-2009 comparison. Where is the growth and why does anyone expect it? Just because the Federal Reserve Bank raised the discount rate it has not raised the Fed funds rate. The discount rate only comes into effect when a bank needs to borrow from the emergency window. Therefore, it is prudent to become a trader or else beware going forward.
Nicholas Santiago
Chief Market Strategist
InTheMoneyStocks.com
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