In the waning days of 2004, this column predicted a difficult and bifurcated stock market for 2005. So far, this year has played out close to expectations.

In February, I maintained that in a year of extreme investing , good money could be made in super-high-growth companies such as Apple ( AAPL) or Google ( GOOG), as well as in super-cheap stocks like KB Home ( KBH) or Citigroup ( C). Well, three out of four ain't bad!

I also expected the cap-weighted indices as well as the so-called average stock to struggle. So far this year, the indices have ranged from up a little to down mid-single digits. No one has gotten rich buying and holding any diversified index fund. And I don't think the second half will be much better.

My deep-value investment discipline has generated solid, if not spectacular, returns so far this year. Holdings in the energy, managed care, homebuilding, technology and industrial sectors have provided strong returns. Most, if not all, of these names were highlighted in columns over the past 12 months.

On the downside, a few of the technology turnaround and value concept positions have disappointed. Also, my concern about difficult market conditions left me underinvested in many profitable holdings. A larger net long position would have been much better, despite the sloppy market. It feels as if investors, myself included, have made it much more difficult than it should have been.

My outlook for the market is more of the same. I am not heading-for-the-hills negative, but I believe that the next move is down. I am not selling my favorite longs but rather hedging them with short positions (and I always use buy-stop losses in the process). Should stocks correct, I could be enticed into becoming more normally invested, especially in cheap stocks that have dipped on decent fundamentals. By now, you should recognize my buy discipline.

But as I survey the investment landscape, beneath the sound bites and silly sell-side "blowout" labels, I am becoming more concerned about the equity market.

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