This year we really have to tip our cap to the institutional money that moves markets. So far during the summer of 2010 the major stock market indexes have rallied before every major holiday. If you look at a chart of the S&P 500 Index beginning around late May you will notice that the markets found a low on May 25th, and rallied into the Memorial Day holiday which was celebrated on May 31st. This was a period when traders and investors were very fearful because of the flash crash that occurred on May 6th. Again, the institutional money rallied it higher before the first major holiday of the summer when the U.S. consumer plans vacations and events to start the summer. This is simply when the U.S. consumer will spend money.

Next we have the the major stock market indexes making a low around July 1st just before the Independence Day holiday which is July 4th and celebrated July 5th this year. Once again this is a period when the U.S. consumer will usually travel and spend money. Do you happen to see the pattern that is building here?

Here we are this week when the S&P 500 stages a three day rally beginning on August 31st. This morning the government’s non-farm payroll report comes in much better than expected and the market rallies ahead of the last holiday of the summer season. It is not surprising that the markets rally higher before the Labor Day holiday. Quite frankly it would be surprising if the market did not rally ahead of the holiday. Please note that this rally occurs when the public was hearing about the ‘Hindenburg Omen’. Most people outside of the trading world have never heard of the Hindenburg Omen before and just the title sounds frightening. Again, the small investor is the one that gets frightened out of his or her positions at the lows.

As we all know by now the U.S. consumer accounts for 70.0 percent of the gross domestic product in the United States. Therefore, if the government and the Federal Reserve Bank are going to inflate this market back to health it will require the consumer to spend again. Reading sentiment has been pivotal throughout 2010. Understanding sentiment is what has made money in this market. 2010 remains a traders market and is not meant for the buy and hold investor.

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Nicholas Santiago
Chief Market Strategist
www.InTheMoneyStocks.com