By Nicholas Santiago on June 11th, 2010 12:42pm Eastern Time
Today the major market indexes seem to be pausing after yesterday's huge point rally. As most traders know this market has been like a yo-yo, trading up sharply one day only to be down sharply the next. The daily swings in the Dow Jones Industrial Average have been extremely wide. It seems that almost every other day the DJIA is either up over 100.00 points or down over 100.00 points. While this is not healthy action, the market has still held above the February lows and that must be respected. Today the SPDR Dow Jones Industrial Average ETF (NYSE:DIA) is trading lower by 0.21 to $101.67 which is a mild pullback day. The same can be said for the SPDR S&P 500 ETF (NYSE:SPY) as it is trading lower by 0.28 to 108.87 having a pausing session. This type of activity is not uncommon after a major rally or a major decline.
Next week is options expiration week which is always a volatile trading period. Therefore, traders can expect more of this yo-yo type activity from day to day. During options expiration there are a lot of games that are played by the institutional money that has the cash on hand to move the markets in their preferred direction. Usually it is the small retail option investor that will pay the price. Therefore, it is prudent to be very selective next week.
Many investors and traders are now talking about the worst of the downside action being behind them. This is something that I say is completely wrong. The markets never go up or down in a straight line, therefore, this has been a traders market. After a year long rally that we experienced in 2009 sharp bounces and rallies along the way are to be expected. However, 2010 is a traders market and not like 2009 where the market floated higher.
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