If investors' stomachs are steadier this post-Thanksgiving week than they were at this time last year, it's not just because anxieties over Afghanistan and anthrax are disappearing. It's also because extreme volatility has exited the market, stage left.

This time last year, we had just suffered through a three-month period when the

Nasdaq Composite

had risen or fallen 17 times by more than 3% in a single day. In contrast, we have had just seven such days in the past three months, including just a single day in which the Nasdaq has risen or fallen more than 100 points. And the only three times the Nasdaq has changed more than 4% since the markets reopened on Sept. 17 have been up days: Sept. 24, Oct. 3 and Oct. 11.

This has been truly something to be thankful for, since market historians report that past volatility can be a harbinger of volatility in the near future. Last year's volatile October and November -- when bulls and bears were battling it out over wildly different views of the economy in an unpredictable political environment -- led to an even crazier December and January. In those two months, the Nasdaq Composite changed by more than 3% on 18 occasions, including six times when it fell by more than 150 points, and two when it rose by 274 and 324 points.

If past patterns hold, we might thus be able to avoid the gut-wrenching winter of last year. And that can only help to restore investors' shattered confidence in the market.

Unfortunately, however, that's not an interpretation shared by Mr. P, a hedge fund manager whose views I have related here for the past year. He has stated that he believed the attacks were "very bad for bonds, very good for stocks," that American investors' natural optimism would soon replace their terrorism-induced pessimism, that equity-income funds would need to rebalance their portfolios by buying more stocks, that industrial manufacturing would show signs of revival by November, that Christmas sales would surpass gloomy forecasts, and that a significant rally would occur from October to December.

Now that all of those predictions have played out, he recommends that investors brave enough to take his advice in September now harvest profits and wait out December in cash -- or at least with a smaller exposure to equities. He's not really bearish; he just can't figure out where the next round of good news will come from, because the larger-than-expected rally seems to have already discounted an economic recovery that hasn't materialized. He and his partners halted trading in their own fund in mid-November after achieving their goal of a 100% gain for the year. They're now on a six-week holiday to study and prepare for 2002.

December Seasonal Plays

If you're determined to play equities in December anyway -- and why not, it's typically one of the three best months of the year -- then you might want to focus on ones that tend to do best in the month historically. My November seasonal picks turned out well: The longs were up 17% as a group through Nov. 21, and the shorts were successful to the tune of 3%. These are one-month trading ideas only, not names to hold forever, so if you are playing along, be sure to place stops under both winners and losers to capture gains and limit losses.

In December, leading sectors have tended to be technology, biotech and health care. My Top 10 choices are listed below, though there are three more that just missed the cut:

Sun Microsystems

(SUNW) - Get Report

, up 9.9% on average over 13 years;

Interpublic Group

(IPG) - Get Report

, up 9% on average over 13 years; and

Checkfree

(CKFR)

, up 18.5% on average in five years.

Retailers and toymakers have tended traditionally to be weak sectors in December -- no matter what the consumer-spending climate is like. Here are my Top 10 to consider selling or shorting in the month.

Chip-Kickin' Korea

If you're tired of playing technology stocks in the same old way, spin the globe and lay your bets on South Korea.

Most technology investors know that the Semiconductor Index is the red-haired cousin of the Nasdaq Composite, outperforming the broad benchmark when technology stocks are in favor and underperforming it when technology stocks are in the doghouse. But how many know that the red-haired cousin of the SOX is an index fund that tracks South Korean stocks, formally known as the iShares MSCI South Korea (EWY)?

Monday was a typical day for this relationship: The Nasdaq Composite was up 2%, the Semiconductor Index was up 4.14% and the iShares South Korea was up 5.5%.

The EWY has shadowed the Semiconductor Index in almost every month since its inception last year, but typically with higher highs and lower lows. From Oct. 1 to Nov. 21, as the Nasdaq rose 31% and the SOX went up 47%, the technology-heavy South Korean index was up 56%. Over the past year, the South Korean fund is up 40%, vs. a 15% decline for the Nasdaq Composite and a 7% decline in the Semiconductor Index.

The EWY attempts to mimic the aggregate performance of all stocks that trade in South Korea, but it is heavily influenced by its top two holdings: Samsung Electronics (23% weighting) and SK Telecom (11% weighting). It looks overbought at the moment, so I wouldn't recommend purchase now. But keep it in mind as a way to potentially both diversify your portfolio overseas and pick up some tamer technology exposure.

At the time of publication, Jon Markman owned or controlled shares in none of the equities mentioned in this column.