By Nicholas Santiago on February 5th, 2010 12:53pm Eastern Time
Lets face it, the stock market is long overdue for a true correction from the 2009 bull run. The SPDR Trust (NYSE:SPY), Diamonds Trust (NYSE:DIA), and Powershares QQQ Trust (Nasdaq:QQQQ) have staged one of their best years in trading history. During 2009 the major indexes have all rallied higher by more than fifty percent into the end of the year. It is important to realize since March 2009 the stock market has not had a single ten percent pullback/correction from that time.
During the recent decline from the January 2010 high the SPDR TRUST (NYSE:SPY) is down about 8 percent. In order to see a 10 percent correction the SPY would have to drop into the 103.50 level. While this is certainly possible it is unlikely to just go straight down. Please remember that markets will usually have bounces after such a huge 2009 point rally. Often many traders are accustomed to buying every dip, and this mentality does not change easily and should last a while.
Therefore, it is important to remember that this environment will remain a technical traders market. The key is to know and recognize when stocks and indexes are at the best support and resistance levels. As a trader we simply just want to buy support and sell resistance. There is nothing more than that. The traders and investors that are able to do this will have a successful 2010.
Nicholas Santiago
Chief Market Strategist
IntheMoneyStocks.com
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