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Investors and traders should not be looking at improving fundamentals including a better than expected increase in GDP to 5.7% as compared to the estimate of 4.6% which was expected by a majority of economists for the U.S. economy’s fourth quarter of 2009 as a BUY signal in a correcting stock market. The psychology and the mood of investors has shifted from positive to negative because of the regulatory reforms for the banks and financial companies which have been proposed. This mood is reflected in the inability of the price of Microsoft’s shares to advance on the heels of the record quarter that they announced today. Microsoft’s results were also much higher than anticipated by Wall Street analysts.

Due to the proposed regulatory reforms for the banks and financials and the high probability that they will be enacted I expect that 2010 will be a particularly brutal year for the stock market and the major indices including the Dow 30 and the S&P 500. I also predict that the highs for the Dow 30 and S&P 500 that were hit on Tuesday January 19^th will prove to be the high water mark of the breathtaking 10 month rally which began after the market traded to eleven year lows in March of 2009. My rationale for my prediction is explained in an in-depth report, “Financial Regulatory Reform is a Game Changer” which I have recently published. Access to the report is currently available at http://www.bearmarkettracker.com/.

Investors should be extremely cautious. I am already reading and hearing that the decline in the stock market, which began in the middle of January 2010, is likely to be the 10% correction that everyone has been waiting for. I am still of the belief that we have not yet seen the lows for this bear market which began in October of 2007. It would not surprise me one bit to see the major indices, which have not experienced since March of 2009 slice right through a 10% correction point like a hot knife through butter. I would avoid buying on a 10% correction and would certainly recommend having 80% of a portfolio in cash equivalents or U.S. Treasury bills.

For those investors who have been lulled by the “magical” ten-month rally into believing that the bear market is over I suggest a reading of my most recent report and a review of my December 2008, article “A Super Bear is Upon Us”. It explains in detail as to why I believe that we are currently in a bear that will continue on until at least 2015. I also recommend that investors watch the two videos in the Video Library at http://www.bearmarkettracker.com/.