Peaks and valleys in the stock market are nothing new but, so far in 2010, the peaks and valleys that can be seen in a chart of the S&P 500 look like a relief map of the Himalayan Mountains. One glance at the chart here of the SPDR S&P 500 (SPY) shows just how truly volatile things have been for the benchmark domestic equity index so far this year.

As you can see, there was some fast-and-furious buying in stocks that began in early February and that lasted until late April. SPY was up 13.8% over that time. That big move upward was after the index had fallen 7.2% from its January highs. The next leg for stocks was decidedly to the downside, as those April highs evaporated into a 15.3% decline all the way through the beginning of July.

True to form, however, stocks regained their bullish composure and fought their way back up 9.8% from July to early August. Yet again, true to volatile form, stocks then slid 6.1% from their August highs to their late-August lows. You’d think that would be enough volatility for one year, but the market wasn’t done yet. In fact, the late-August to September surge took stocks up some 9.3%, putting SPY just slightly above where we were in mid-May and mid-March.

I must say that this kind of market environment is great if you’re a trader, but when you’re managing your serious money -- the money that will fund your retirement -- this kind of volatility is anything but settling. In bear markets, you can use inverse funds to make money while stocks are trending lower. In bull markets, you can use a variety of funds to make gains and beat the overall trend of a rising equity tide. The real challenge has been in environments such as we’ve had this year, where the trends last only a few months at best.

One thing that strikes me as clearly evident when looking at this chart is the probability of a hefty pullback off of the market’s current level. If the volatile pattern of 2010 holds, we are liable to get another pullback somewhere between 6% and 15%. My suspicion is that we’re liable to get that pullback soon, but so far, there only have been a few down days where sellers really have demonstrated a willingness to act.

If you are long stocks here, your best bet right now is to continue riding the current wave higher. But remember, you must have a stop-loss order in place to protect your gains. There’s nothing worse than watching a volatile market zap your unrealized gains, so make sure you keep what you’ve earned by using a stop-loss price designed to get you out of a winning position with a nice gain.

If you are out of the market right now, then your best bet is to hang onto your cash and wait for the next wave of volatility to hit. Judging by the pattern in 2010, that wave will bring stocks substantially lower -- and that’s when you’ll want to move into equities.

If you’d like to find out where to set your stop losses on winning positions, and when to get back into stocks after a pullback, then you need my Successful Investing advisory service. Hey, we’ve been beating the market for more than three decades, and one of the reasons is because we have a plan that tells us when to buy and, more importantly, when to sell stocks. If you’d like to see what this plan is all about, then check out Successful Investing today.