ATTENTION Advanced Investors and Finance Professionals: If You Are Reading

8/14/2019 ATTENTION Advanced Investors and Finance Professionals: If You Are Reading

1/8

ATTENTION Advanced Investors and Finance Professionals:

If you are reading this you should downloadValuEngine Institutional Software to seehow VE's powerful quantitative tools can increase your productivity and effectiveness.

October 2, 2009

MARKET OVERVIEW

Index started weekThursday

close4 day

change4 day

change %ytd

DJIA 9663.23 9509.28 -153.95 -1.59% 8.40%

NASDAQ 2101.92 2057.48 -44.44 -2.11% 30.31%

RUSSELL 2000 600.18 583.75 -16.43 -2.74% 16.86%

S&P 500 1045.38 1029.85 -15.53 -1.51% 14.05%

Summary of VE Stock Universe

Stocks Undervalued 60.91%

Stocks Overvalued 39.09%

Stocks Undervalued by 20% 31.64%

Stocks Overvalued by 20% 20.56%

SECTOR OVERVIEW

Sector Change MTD YTD Valuation Last 12-MReturn

P/E Ratio

Basic Industries -2.93% 0.83% 58.22% 9.15% overvalued 4.37% 25.11

Capital Goods -2.69% 0.17% 31.59% 6.00% overvalued -8.09% 20.41

Consumer Durables -2.52% 0.98% 56.41% 3.48% undervalued -13.69% 25.91

Consumer Non-Durables -1.84% 0.09% 42.12% 4.54% overvalued 3.60% 20.95

Consumer Services -2.60% 0.09% 54.59% 0.51% undervalued -1.24% 21.17

Energy -3.83% -0.13% 33.16% 8.77% overvalued -16.99% 18.71

Finance -1.61% 0.29% 22.59% 1.41% undervalued -9.05% 19.2Health Care -2.01% 0.26% 55.55% 11.71% undervalued 10.25% 19.32

Public Utilities -2.01% 0.12% 15.79% 8.24% undervalued -2.28% 15.29

Technology -2.81% 0.07% 61.73% 7.85% undervalued 6.01% 25.44

Transportation -2.49% -0.08% 22.53% 3.54% overvalued -11.03% 17.74
http://www.valuengine.com/pub/main?i=0http://www.valuengine.com/pub/main?i=0http://www.valuengine.com/pub/main?i=0


2/8

Market Talk--Overall Universe Undervaluation Declines

Below, we have the recent history chart for our overall universe undervaluation figures vs.the S&P 500. This chart tracks stocks which are calculated to be undervalued by 20% ormore. As you can see, the readings spiked in December '08-January '09, began to recede asthe market recovered from its March '09 low, and have now begun to recede to what wewould consider a more "normal" level. Our model now has the market at a level not seensince November, 2007.

Below we have a chart that tracks universe undervaluation in excess of 20% that covers theentirety of our historical database and dates back to 1991. As you can see from this chart, in

the past whenever the undervaluation in excess of 20% or more figure has spiked above 50%and then receded, we have had a fairly robust market bottom call. However, if you look atthe 2001-2003 downturn you find that the figure receded then increased again. This wasindicative of the fact that the bottom was not a "v-shaped" recovery as occurred in theaftermath of the LTCM debacle in the late 90s.


3/8

But as you can see, even in that "w" shaped recovery, the level of undervaluation greaterthan 20% did not recede to the sort of level we see now until the markets were well on theirway to recovery. Of course, there is no guarantee that a double dip will not now occur--and

plenty of analysts (including our own Chief Market Strategist) find that the market up trendhas run its course and a correction is imminent, but this chart certainly looks moreencouraging than it did a few months ago.

What's HOT--The VE Stock of the DayChief Market Strategist Richard Suttmeier's Morning Briefing VE Stock of the Day.

Cisco Systems (CSCO) Cisco Systems, Inc. engages in the design, manufacture, and saleof Internet Protocol (IP)-based networking and other products related to the communicationsand information technology (IT) industry and in the provision of services associated with theseproducts and their use. The stock is rated a HOLD according to ValuEngine with fair value at$19.37, which makes the stock 19.2% overvalued. rating.
http://www.valuengine.com/nl/mainnl?nl=Dhttp://www.valuengine.com/nl/mainnl?nl=D


4/8


5/8

Analysis The daily chart for Cisco shows flat to declining momentum with the 21-day and50-day simple moving averages at $22.84 and $22.23. My quarterly value level is $17.79 withsemiannual risky level at $24.42.

Courtesy Google Finance

Suttmeier Says--Commentary and Analysis from Chief Market Strategist Richard Suttmeier

If you have any comments or questions, send them to [email protected]

Treasuries

For the 10-Year note the weekly and monthly supports are 3.457,

3.677 daily resistance at 3.194, and the 200-day simple moving averageat 3.125, last tested on May 21st. Risk aversion trumps increasingsupply, and the flight to quality is a warning for stocks.

Commodities

For gold, I show semiannual and monthly supports at $991.7 and $978.8 with quarterly andsemiannual resistances at $1094.4 and $1,101.9.

Copper ended Thursday below its 21-day and 50-day simple moving averages at 281.33

and 277.45--which is another warning against the global growth story. To prove the globalgrowth story, copper needs to breakout above the 200-week simple moving average at291.93.

For crude oil, my annual pivots are $68.81 and $66.51 with monthly and quarterlyresistances at $82.98 and $83.16. A weekly close above the 200-week simple movingaverage at $75.00 remains upside key.
http://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1254440593953&chddm=54740&chls=IntervalBasedLine&q=NASDAQ:CSCO&ntsp=0http://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1254440593953&chddm=54740&chls=IntervalBasedLine&q=NASDAQ:CSCO&ntsp=0http://www.valuengine.com/nl/mainnl?nl=Chttp://www.valuengine.com/nl/mainnl?nl=Chttp://www.google.com/finance?chdnp=0&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chdet=1254440593953&chddm=54740&chls=IntervalBasedLine&q=NASDAQ:CSCO&ntsp=0


6/8

Housing and Financials

On Thursday, Bernanke defended a Council of Regulators to monitor systemic risks. Thereis already a Congressional Oversight Panel that was put in place to advise the US Treasury

about TARP issues. The COP is being ignored as Treasury will not order fresh stress tests asadvised by COP.

This is what will happen to any Council of Regulators. We need to appoint regulators whoknow what the heck they are doing! The US Treasury, Federal Reserve and FDIC ignoredtheir on regulatory guidelines for C&D and CRE loans, and the banking system is sufferingbecause of their lack of oversight. Bernanke's latest proposal will only result in a circle ofregulators that will point fingers at one another when the next financial crisis hits.

The Housing Sector Index (HGX) ended Thursday below its five-week modified movingaverage at 103.01 / 102.16. If it stays there today, the weekly chart shifts to negative. HGX issuffering the same fate as the now "cash-less for clunkers"automakers and provides a similar

warning for the home builders once the $8,000 first time home buyer tax credit sunsets onNovember 30th.I predict that some of these first time buyers will be in default by yearend.

The Americas Community Bankers Index (ABAQ) was just above its 50-day and 200-daysimple moving averages at 149.21 and 147.26 on Wednesday--and ended below them onThursday at 148.92 and 149.41. Today is Bank Failure Friday. Can the FDIC afford to closeany banks this evening?

The Regional Banking Index (BKX) was above its 21-day and 50-day simple movingaverages at $46.39 and $44.63 on Wednesday, but closed Thursday below the 21-day at$46.41 and held the 50-day at $44.80.

Major Indices

Thursdays market declines resulted in levels that straddle key monthly pivots-- 9306 ismonthly support on the Dow, 1033.3 is the monthly pivot on the S&P 500, and 2183 ismonthly resistance on the NASDAQ. This should be the trading range until the Ides ofOctober. All of this downside risk began with the Key Reversal Day on September 23rd.

The Dow closed below its 21-day simple moving average at 9,644 with the 50-day assupport at 9,450. A close today below the five-week modified moving average at 9,457 wouldbe another warning.

The S&P 500 also closed below its 21-day at 1046 with the 50-day as support at 1021. Aclose today below the five-week modified moving average at 1022 would be another warning.

The NASDAQ also closed below its 21-day at 2088 with the 50-day as support at 2032. Aclose today below the five-week modified moving average at 2036 would be another warning.

We are in for a period of lower highs as the multi-year bear market returns.


7/8

--A Unique Look at the MarketsChinese artist Chen Wen Ling provides commentary on the fate of Bernie Madoff and the

perils of a Bull Market built on lies--the Chinese ideogram for flatulence--""--is also slangfor deception and lies.

"What You See Might Not Be Real"

--The ValuEngine View Portfolio Newsletter

Have you watched the market's performance over the past six months and felt like you weremissing out on the action? If you feel ready to take advantage of the best stock marketperformance in more than 70 years, then please considerThe ValuEngine Viewnewsletter.

The ValuEngine Viewnewsletter is the product of some of ValuEngine's most sophisticatedacademic research. It is based on our award-winning stock valuation model. Our modelrelies on a multi-faceted approach and considers fundamental variables such as a company'strailing 12-month Earnings-Per-Share (EPS), the analyst consensus estimate of thecompany's future 12-month EPS, the 30-year Treasury yield, and eleven additional firm-specific variables to create a more accurate reflection of a company's fair value


8/8

The ValuEngine Viewnewsletter strategy integrates the outputs of our Valuation Model withsome basic share price, market cap, and industry diversification rules to create an initialportfolio that is carefully analyzed and refined by hedge fund manager and investment advisorEric Stokes--author of"Market Neutral Investing." With the ValuEngine View, Stokesprovides subscribers with an equally-allocated portfolio of 15 stocks that is re-balanced onceeach month. He provides additional charting and analysis of each selection so that you garnerfurther insights into each stock pick.

Below, you can see some recent results--June-July 2009:

Click here for a free sample edition of the ValuEngine View orClick HERE to subscribe!

Steve HachSenior AnalystValuEngine.com
http://www.amazon.com/gp/product/0793194148?ie=UTF8&tag=value0b-20&link_code=as3&camp=211189&creative=373489&creativeASIN=0793194148http://www.amazon.com/gp/product/0793194148?ie=UTF8&tag=value0b-20&link_code=as3&camp=211189&creative=373489&creativeASIN=0793194148http://www.valuengine.com/download/report/ValuEngineView.pdfhttp://www.valuengine.com/download/report/ValuEngineView.pdfhttp://www.valuengine.com/nl/mainnl?nl=t&pid=65http://www.amazon.com/gp/product/0793194148?ie=UTF8&tag=value0b-20&link_code=as3&camp=211189&creative=373489&creativeASIN=0793194148http://www.valuengine.com/download/report/ValuEngineView.pdfhttp://www.valuengine.com/nl/mainnl?nl=t&pid=65

ATTENTION Advanced Investors and Finance Professionals: If You Are Reading

Documents

Transcript of ATTENTION Advanced Investors and Finance Professionals: If You Are Reading