Two Weeks Down, Two Weeks Up

It's been a wild 31 days; the stock market averages dropped 10% in two weeks, then bounced back the following two weeks to nearly recover their losses.

The Dow is just 3.4% below its record close on Jan. 26, while the S&P 500 is down 3.2% and the Nasdaq Composite is off 1.1%

From a longer-range perspective (57 days!) stocks are higher since the start of the year.

The Dow, S & P 500, and the NASDAQ year-to-date.

I stood pat throughout it all because I knew that stocks would recover--no, just kidding. Bitter experience has taught me not to sell when rationality-defying fear is welling up in the pit of the stomach. That's when I've made the worst selling decisions.

Not that there are no reasons to be worried: complex financial instruments have attracted $billions in new money, and computer algorithms using these and other measures trigger waves of selling and buying in the blink of an eye. Also, an environment of increasing interest rates, which we haven't seen for a long time, historically has spelled death for bull markets.

Consider the correction as a warning. I will use the late-February market recovery as an opportunity to trim some equity positions and invest in bonds and short-term instruments, whose yields are improving.

Haven't you heard? interest rates are going up.