NEW YORK (TheStreet) -- Doug Kass of Seabreeze Partners is known for his accurate stock market calls and keen insights into the economy, which he shares with RealMoney Silver readers in "The Edge," his daily trading diary.

This week, Kass wrote about his hopes for Yahoo!, discussed the lessons he learned from the markets this week and examined what history can tell us about the

S&P 500's

current rally.

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Will Yahoo! Catch Up?

Originally published on Jan. 21 at 9:28 a.m. EST.

As I

mentioned

yesterday, dysfunctional Yahoo!'s shares have been well behind its peer group over the course of the last few months.

With

eBay

(EBAY) - Get Report

and

Google's

(GOOG) - Get Report

great numbers, I continue to expect (pray!) for a catch-up in Yahoo!'s shares over the near term.

At the time of publication, Kass was long Yahoo! common stock and call options, and long EBAY common stock.

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Seven Lessons Mr. Market Taught Us This Week

Originally published on Jan. 21 at 7:41 a.m. EST.

When investing or trading, it's important to live and learn.

Here are some of my key takeaways, thus far, from Mr. Market this week:

    There are substantive risks to momentum-based investing. Even in a bull market, mo-mo investors in Coinstar , F5 Networks and other highfliers, including several industrial plays such as U.S. Steel and Freeport-McMoRan Copper & Gold , as well as traders/investors in commodities such as gold, which is among the most crowded long trades extant, learned this tough lesson over the past couple of days.

    While the overall market's price action suggests limited downside risk, there might also be limited upside reward, as the price action in certain market-leading stocks suggests that a lot of the good company-specific news and that of the economy might have been discounted. (I continue to see a sideways market in 2011.)

    The market's unrelenting advance is not likely unlimited, as trees don't grow to the sky. The uninterrupted advance since last summer could grow less consistent and more challenging as monetary stimulation wanes, as we pass the easy compares and as the bills of our fiscal imbalances come due.

    If investing/trading in highfliers, particularly in light of a relatively low VIX, buy protection. Consider cheap protection by purchasing out-of-the-money puts. If you are short, consider the cheap protection of buying out-of-the-money calls.

    The recipe for investment success in the coming months might lie with a more flexible and opportunistic trading strategy (and through the identification of group rotation) rather than a buy-and-hold strategy. (Sell the rips and buy the dips in early 2011.)

    While bottoms-up S&P 500 profit projections remain elevated, the path to smooth and self-sustaining earnings growth does not remain a certainty. For example, profits at several high-profile financial companies disappointed vis-a-vis consensus. As well, higher input costs are beginning to call into question the general vulnerability of corporate profit margins in the quarters ahead.

    Always be prepared for surprises, and be diversified -- that's why I do my surprise list every year -- case in point, the Steve Jobs announcement at Apple .

    At the time of publication, Kass was long Freeport McMoRan Copper and Gold

    .

    History Lesson

    Originally published on Jan. 19 at 7:22 a.m. EST.

    • The S&P 500 has risen by more than 23% for more than three months and without a correction of 5% 26 times throughout history.
    • The current rally phase of 24% has lasted nearly 100 days vs. previous rallies of about 200 days.

    "History doesn't repeat itself -- at best, it sometimes rhymes." -- Mark Twain

    For the 26th time in history, the S&P 500 has now risen by more than 23% for more than three months and without a correction of 5%.

    Historically, the median/average percentage price advance in the first-rally phase following the above conditions has totaled 36.5% and 37.9%, respectfully.

    The current rally phase of 24% has lasted nearly 100 days vs. previous rallies of about 200 days. (The strongest rally was a 62% spike between September 1953 and January, 1955, lasting 327 days.)

    Following these rallies, the average correction has been 7.5% and 8.9% (median/average), covering only about 27 days on average. None of the corrections was less than 5%, and the largest drop was following the October 1960 and December 1961 rally when the S&P declined by nearly 24%. Seven of these corrections occurred in 10 days or less!

    Following these corrections the average second phase of the rally came in at 10.5% and 13.4% (median/average), lasting an average of 62 days. There were three second-phase rallies of 30% or more. Six of these rallies took 20 days or less! And three of these rallies lasted more than 140 days, with the longest second-phase rally lasting 370 days (following the initial rally of October 1962 to October 1963).

    Lastly, seventeen of the second rally phases took the markets to new highs. Eight second-rally phases failed to make new highs.

    Doug Kass is the general partner Seabreeze Partners Long/Short LP and Seabreeze Partners Long/Short Offshore LP. Under no circumstances does this information represent a recommendation to buy, sell or hold any security.