As I suspected in my last piece, the euphoria over the blockbuster jobs report earlier this month merely represented another selling opportunity to get out of the market at better prices. It is amazing how quickly sentiment can turn in the market. In what I hope will be my last piece in my "fear" series, I now point your attention to the ironic fear in the market that the economy has suddenly become too strong. We know the bear rally of 2003 must be grinding to a halt because we have gone from the fear of missing upside potential to a fear that the very economic success that upside potential represented is actually coming to fruition. Confused yet? Good - you are probably not alone!

Now, as the market struggles to price in maybe about a year's worth of rate hikes, the convulsions I suspected would hit the market when the Fed finally started raising rates have come into full effect. Back then I also suspected such convulsions would mark a buying opportunity. Rates are so low now that it will take a whole lotta rate hikes to truly bring the economy to a grinding halt. But what to buy is the big question now. It certainly seems you want to stay away from interest-rate sensitive stocks. Interesting how almost everyone is saying that. So, I would have to keep those in plays for quick trades (albeit risky ones). I am also hearing that the place to be for the time-being when rate hikes (or the fears of them) become prevalent is technology and most cyclicals. I believe the presumption is that these companies can still grow earnings faster than the Fed can raise rates. If so, they mark fertile ground for those players who must go long something. When those stocks go bad, those same players will rush to more defensive names like drugs and health care. Witness how as technology continues to sink with every good earnings report, the defensive names have picked up steam. Overall, stock rotation from sector to sector should continue like a game of hot potato until it is finally clear in one sad moment that a real top has been put into the market. And all because the economy finally delivered the tremendous results that everyone was looking forward to a year ago. You simply cannot make this stuff up. I suppose we need people to start fearing a recession to get some real stock buying going again.

So let's sum this up: we are now afraid of a strong economy, no longer afraid of being the last seller (the market is putting in its top), afraid of terrorism (but only when it suits the foul mood of the market at the time), afraid of strong jobs reports, afraid that Bush will snatch defeat from the jaws of victory, afraid the Fed will spoil the party with rate hikes, afraid that the Fed is not afraid enough, and, most importantly, afraid that Duru will turn bullish again!

Ó DrDuru, 2004