Thoughts along the journey

I would like to take a moment in a busy day to thank Toddo and the critters for the opportunity to help educate, while sharing opinions and insights on the financial markets and life each day going forward. The work that he has put in this project to make it happen boggles the mind. When he started this project, it was to help educate the public about the nuances of the financial markets vs. another moneymaking idea. It started that way and remains that way. For that Ruby would be proud!

Second only to Toddo is the lovely Casey who has been the backbone of the whole operation and has been instrumental in making it happen and getting it to work. The scary thing is that Casey is as nice as she is talented. When Toddo says give her kudos, he means it – my friend Todd does not lie!

Now that we have the love in print, lets get back to the markets. As many of my readers will know, I continue to believe that this market is very similar to that of the fourth quarter rally a year ago, almost to the day. The vast majority of the gains were experienced by the first week of December and then the first meaningful pullback ensued. What caused it? Good news out of Oracle (ORCL) and Intel (INTC). The market rallied into the news and then fell back on the news.

The peak before the meaningful correction came after a 20%+ move in the DJIA and SPX and over 30% in the NAZ (sound familiar?). The correction that began December 6th, 2001 lasted almost two weeks and took the SPX down by roughly 5%, the NAZ down by nearly 10% and the SOX down by almost 15% - all in less than two weeks. At the same time, the consumer staples, which were beaten down while tech and telecom were surging rose by nearly 10%.

In life, the definition of insanity is to do the same things over and over while expecting a different result. This year’s rally has proven since the low in October to almost be exactly like last year’s run, which means that instead of looking for other reasons, just follow what is working and let the rotation out of high beta and into low beta run its course.