*Blue Plate Specials* Portfolio – 9/24/10

Market Notes
With an apparent mind of its own, the market abruptly reversed course which, frankly, caught good ‘ol Dr. K off-guard. The previous day’s action gave little indication that it was setting up for a rally but if the market was completely predictable, there would be no such thing as alpha.

Will the rally continue? The indications are good that it will. First, both the Dow Industrials and the Nasdaq blew through recent resistance. So did the S&P 500 but it passed the 1042 hurdle only to bump its head against 1050 resistance. What we’d really like to see is the Dow Transports, the DTX, break above the 452 level which, so far, it’s been unable to do. Maybe Monday.

Also bullish are the facts that the SQQQ, the ultrashort QQQQ tracking stock, gapped down making a new low while its inverse counterpart, the TQQQ, broke out. I know these aren’t indicators that are widely watched, but I find that they do a pretty good job of determining near-term market direction.

A robust rally includes positive participation in all of the “important” sectors—financials, materials, tech are among them. Most of these important sectors have been rallying, especially tech, but the relative lack of participation in the financial sector is a bit disconcerting. If that sector, represented by the XLF, can break recent resistance in the $15 area AND if the VIX, the volatility index, can pierce the $20 level, then the market will really be off to the races.

That might happen next week or we may have to wait until the November elections. If the Republicans can retake the legislature then Santa Claus will definitely be comin’ to town.

New Long Portfolio
Friday’s portfolio selections came from the following *Blue Plate Specials* lists: Breaking out to new highs (4), Darlings of the Day (1), and Low-priced Leaders (5).


Today’s portfolio close-out
The 9/9 portfolio was cashed out for a 3.2% gain. Note that Sprott Resource’s symbol changed from QCC when it was first selected to SILU.


Further Actions
Satyam Computers (SAY), a component of the 9/22 portfolio, is having accounting problems (rarely a good sign) and issued a press release on Friday saying that it was going to have to delist itself from the NYSE because of filing noncompliance. The stock tanked and I exited the position at $4.52.

You win some, you lose some—what can I say?

The 9/10 portfolio will be sold on Monday.

[See 4/21/10 blog for further details on how these portfolios are constructed.]

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