*Blue Plate Specials* Portfolio – 10/21/10

Market Notes
A return to sanity was something I asked Santa for in yesterday’s blog but obviously Santa was busy building teeter-totters because that’s what today’s price movement looked like—first up, then down, then back up. Ay-yi-yi! My head, Lucy, she is spinning!

CNBC is attributing this phenomenon as a reactionary action to the movement in the greenback. Being a natural skeptic, I compared the charts of the US dollar index with that of the S&P 500 on a weekly basis and found that yes, there are periods when the two are inversely correlated but there are also periods when they are not.

For example, in the eight months following the recent recession (from 3/09 – 11/09), the dollar index fell 17% while the S&P gained 60%. Compare that with the period from this past June until now. The dollar fell 14% but the S&P gained only 10%.

It does appear as if there is some sort of negative correlation but I don’t think it’s right to say that it’s the dollar that’s affecting the stock market. Rather, the forces that are affecting the US currency are also partly responsible for the inverse effect on US stocks. It’s also possible that these forces can be decoupled from either market at any time. What these forces are I shall leave to the economists to figure out, but if they are in the process of decoupling then it’s entirely possible that the US dollar does not have to drop more for the stock market to move up.

New Long Portfolio
Today’s ten portfolio selections come from the following *Blue Plate Specials* lists: Breaking out to new highs (5), Breaking out to new highs on Lower Volume(1), Low-Priced Leaders (1), and Darlings of the Day (1).
Capture

Today’s portfolio close-out
We booked a meager profit in the 10/6 portfolio, but a profit is always better than a loss. Most of the portfolio constituents were getting a little long in the tooth and it is no surprise that they are consolidating along with the overall market. Had today been as bullish as yesterday, this portfolio would have done much better.

Capture2

The 10/07 portfolio will be closed out tomorrow.

Portfolio Notes
The mixed market today shook out a few portfolio members. The following positions were exited because the stocks broke near-term support and I don’t think they’ll have time to recover lost ground by the time their respective portfolios are closed out: GBG (10/11) for $2.50, HDY (10/12) for $3.00, and NTWK (10/18) for $1.78. The latter rebounded, closing above $1.80 strong support so I may have acted in haste on that one.

In the woulda-shoulda department: When I closed out SHZ for a massive gain yesterday I should have also closed out REE which had posted a 24% gain but I felt that positive momentum was still on its side. Of course, the gods struck me down and the stock tumbled today closing under the entry price. Wah.

*Important FYI*
Dr. Kris began these portfolios to illustrate how the stocks given in the daily *Blue Plate Specials*can be used to create or enhance your own stock portfolio. This was meant as a short-term exercise only and frankly Dr. Kris is looking forward to doing other things besides spending several hours a day managing portfolios. In particular, this website will shortly have an entirely new, streamlined look and a companion website focused mainly on investing strategies will be also be unveiled. I’m very excited about this and so I’ve decided that October 29 will be the last *Blue Plate Specials* portfolio.

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

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