By Nicholas Santiago on February 10th, 2010 2:42pm Eastern Time
Since the January high, when the SPDR S&P 500 ETF (NYSE:SPY) made a high at 115.00 the markets have pulled back sharply. At that time the Dow Jones Industrial Average which can be traded by using the Diamonds Trust, Series 1 (ETF)(NYSE:DIA) declined nearly 9 points in this ETF from January into February 5th, 2010. Since that time the indexes have bounced back slightly after staging a powerful high volume reversal on February 5th, 2010. The questions remains, is this the low of the correction, or does it have no bearing?
Many traders and investors have been spoiled by easy money and massive liquidity that has helped to float the markets since March 2009. In 2009 the markets basically floated higher throughout the year with out a single ten percent correction. The Federal Reserve Bank (which is basically the title of the central bank in the U.S) has kept the Fed funds rate at or near zero percent since 2009. There have been massive amounts of other global central banks creating massive amounts of money, and flooding the system with liquidity. When you add this to the stimulus programs by the U.S. government, as well as other other governments what other result should we really expect other than a 2009 bull run? As it seems a drastic effort has been made to inflate the market back to health. To understand, and witness the truth of how they tried to inflate the market please take a look at gold, and the rally that it has had throughout 2009. The SPDR Gold Trust (NYSE:GLD) increased by nearly 50 points last year. Many other commodities such as silver, copper, iron, and steel have all soared throughout 2009 as the U.S. Dollar declined.
Now we enter 2010, the markets may possibly be in the midst of the first 10 percent correction in nearly a year. This market has been called the lost decade due to the fact that the markets are negative from where they were ten years ago. The only people that seem to make money in this market are traders. It was traders that saw the bear market on the horizon in 2007. It was the traders that saw the March 2009 low. It will be the traders that make money in 2010.
Nicholas Santiago,
Chief Market Strategist
www.InTheMoneyStocks.com
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