Why market rallies can be frustrating, too

Michael Santoli's column in Barron's this weekend provides an interesting take on the massive October rally...

Even some very good things can happen too quickly, and with too little subtlety, to be truly enjoyed.

The tire-squealing, needle-pinning October rally would seem to qualify as one. Surging more than 18% from its midday Oct. 4 low in 18 trading days, this move was vertical and undifferentiated enough to displease the bearish, the under-invested and the careful long-term buyer almost equally.

"Undifferentiated" here is meant to suggest that "everything" that carried risk went up at once when anything did, further evidence that most pieces of the market remain highly correlated with one another.

The salient point being that Mr. Market is up to his old tricks again, frustrating the largest amount of people - in this case the cash-heavy, the cautious and the legions of newly-minted bears.

Santoli notes that the 86% of S&P 500 stocks were correlated with the rising index last Friday - double the mean of 46%, a measure going back to 1972. So when everything goes up all at once, does the stock picker rejoice at the rising tide that's lifted his ships? I can tell you definitively that he does, provided he owns enough ships in time to participate.

Frustration then, in this case, must be measured by degrees.