The S&P 500 index may now descend to around 1262.60 for starters. How deep this correction will go is difficult to say. My market timing prediction that the sentiment (look up my sentiment page on the feed page for 12-10-2010) was high enough that any advances would be reversed is already coming true for the small caps in particular. In another day or two all the gains since 12-10 may be wiped out.

What to do? You can either sell part or all of your SP500 Index position here and plan to rebuy higher if necessary (and be a bit behind of course which is the risk) OR set a wider stop loss of X % below the current price and sell when it closes below that level.

This correction could be as deep as the one we saw in November or worse, depending on the news flow.

And given the long, long run we’ve had, the market could also go sideways for a day, reflex up for a day and then come down again. I would not bother buying anything but a new high from these levels.

By the way, my SP500 tracking newsletter is out this weekend and its FREE, so please subscribe below if you are concerned about where the stock market may go from here:

Click Here to Subscribe to my FREE SP500Tracker™ and free “Tips”

Standard Disclaimer: Remember, it’s your money and your decision as to how to invest it.