Consequences of a Rising Dollar

The recent strength in the US dollar has had an impact on the market. First, let’s consider what broad effects a rising US dollar traditionally has on the market: historically a rising dollar has coincided with a decline in commodity prices and a decline in international equities.

With that said, the international markets are on defense; interestingly emerging markets continue to exhibit positive relative strength versus the developed countries. The systematic discipline of the portfolio has reduced exposure to the International/Global equity ETF's that exhibited weakness.

Commodities, particularly metals, had been a portfolio holding for a while as metals were showing some of the strongest relative strength in the commodity area. That strength quickly evaporated with the dollars rise and, as a result, Silver was one of the first positions to be sold.
Overall, we're at an interesting spot right now as we've had some indicators reverse down, but others remain positive. When looking at a trend chart of the S&P it appears that we had a well needed reversion to the mean. Of course, that could change, but I am pleased with how the portfolios handled what was a difficult market for many in 2009.
Certainly there are many cross-currents today and it would be helpful to have some means for accurately predicting what the next pieces of information will be, however the reality is that the future will not reveal itself to us until it is upon us, so we use the information that we have today to make the best decisions possible.

Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence.This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.

Please - No knee jerk reactions

Through the first half of January 2010 all of the major indexes had posted gains of close to 2% before the last three days of last week brought much of that to a screeching halt. Despite the fact that indexes like the Dow Jones Industrial Average fell more than 400 points in a week’s time we have mostly seen a reversion to the mean from statistically overbought levels. In layman’s terms: demand had pushed prices way up and this pullback has brought prices back to the middle of the ‘field’.

A knee jerk reaction is not necessary, nor productive. What we have not seen is deterioration in the trend charts of major indices or in the relative strength relationship between cash and market indices. Stated another way, equities as a group, are still exhibiting superior relative strength when compared to cash. Instead of a knee jerk I will take some time and review the current positions in the portfolio. If your stocks are giving sell signals, violating major areas of support, violating trendlines or dropping in score, I will be sure to take some action. Otherwise, the only action that may need to be taken is to raise stop loss points.
150 point swings in the market may seem like a relic of 2008 but, the fact of the matter is that for most investors such moves are simply ‘noise’. What is far more meaningful is not whether the market is fluctuating (as surely it will), but what trends can be deduced from those fluctuations. Is the market still moving higher on rallies, and is it able to find buyers at higher levels than on previous declines? Those are the questions that are worthwhile to investors and also what the Point & Figure chart is designed to evaluate. Right now we are still observing general trends of higher tops and higher bottoms from the equity benchmarks.

Securities and Investment Advisory services offered through NBC Securities, Inc., Member FINRA and SIPC. Investment products 1) are not FDIC insured, 2) not guaranteed by any bank and 3) may lose value including a possible loss of principal invested. NBC Securities does not provide legal or tax advice. Recipients should consult with their own legal or tax professional prior to making any decision with a legal or tax consequence.This is not an offer to sell or buy any securities products, nor should it be construed as investment advice or investment recommendations.