Stocks are undervalued but the Technicals warn!

8/9/2019 Stocks are undervalued but the Technicals warn!

1/6

Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,and commentary can be found HERE.

May 28, 2010 Stoc ks are underva lued but t he Technica ls w arn!

A positive 7-Year auction, but yields rise Thursday afternoon. Gold is trying to stay above $1200with the euro between its 120-month simple moving average at 1.206 and my quarterly pivot at1.2450, and crude oil alleviating an oversold condition. The major equity averages straddle the200-day simple moving averages, which are resistances at 10,278 Dow and 1104 S&P 500.

US Treasury Yields Thursdays $31 billion 7-Year auction gets a C grade as the yield came in at2.815, which is cheaper than my annual pivot at 2.684. The bid to cover was strong at 2.88 and theindirect bid was 51%, above my 30% to 40% neutral zone. After testing 3.061 on Tuesday the yieldon the 10-Year rose above my weekly pivot at 3.320. My quarterly support is 3.467 with my weeklypivot at 3.320 and daily resistance at 3.083.

Courtesy of Thomson / Reuters


2/6

Comex Gold has become currency of last resort primarily on euro weakness. The 50-day simplemoving average is $1162.4 with the May 14th peak at $1249.7 on May 14th.


Nymex Crude Oil is no longer oversold and in a trading range now between my quarterly value level

at $68.03 and the 200-day simple moving average and my annual risky level at $76.64 and $77.05.



3/6

The Euro has formed a trading range around my quarterly pivot at 1.2450 with this weeks resistanceat 1.2690. The euro is no longer oversold, but its not on the rise either. A monthly close below the120-month simple moving average at 1.206 would be the first since April 2003


Dow Trac k s Dai ly, Week ly and Mont hly Char t s

Daily Dow:Theres an up trend resistance line that connects highs going back to November 2009 thatwas tested at the April 26th high. The daily chart profile is negative with the Dow below its 21-daysimple moving average at 10,573. The Dow is below its 50-day and 200-day simple moving averagesat 10,807 and 10,278. It seems that the April 26th high at 11,258 ends the bear market rally since March2009, and starts the second leg of the multi-year bear market.



4/6

Weekly Dow:The Dow ended last week below its 200-week simple moving average at 11,121, aftertesting the 61.8% Fibonacci Retracement of the October 2007 to March 2009 low at 11,246 with theApril 26th high at 11,258. This is 1,000 points away from Thursdays close. MOJO is now declining

and weekly closes below the 5-week modified moving average at 10,561 keeps the weekly chart profilenegative. I still predict Dow 8,500 before Dow 11,500.


All of this talk today on Financial TV about a bull market correction, and that stocks are oversoldis bunk. What are positive are equity valuations, which are cheaper now than on April 26th. The problemis the negative technicals on the daily and weekly charts and knowing that the monthly chart remainsoverbought. Right now sector valuations are cheap, but not nearly as cheap as in March 2009.

I cringe when I hear dollar cost averagingas that strategy cost the average investor his equitywealth over the past ten years. Investors need to learn how to "Buy and Trade" using GTC Limit Orders

to buy on weakness to a value level and to sell on strength to a risky level. I provide this guidance inthe ValuTrader Model Portfolio and the Weekly ETF Report.

Monthly Dow:Back in March 2009 the Dow held the up trend that goes back to the low following TheCrash of 1987. The Dow also held its 61.8% Fibonacci Retracement of the rally from the 1987 low andthe October 2007 high. ValuEngine showed all eleven sectors as 32% to 45% undervalued. Thesewere the reasons I predicted a 40% to 50% rally for stocks on March 6, 2009. The Dow is below its120-month simple moving average at 10,460 with overbought monthly MOJO.


5/6


Over the past month sector valuations have shifted from eleven overvalued sectors to elevenundervalued sectors. The reasons for improved fundamentals include: improved 12-month trailing EPS,upgraded forward 12-month EPS estimates from Wall Street, lower stock prices and a lower 30-Yearbond yield. My prediction is that the technicals will outweigh the fundamentals until thevaluations return to where they were in March 2009.


6/6

Thats todays Four in Four. Have a great day.

Richard Suttmeier

Chief Market Strategistwww.ValuEngine.com(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. Ihave daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters aswell as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as theValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sampleissues of my research.

I Hold No Positions in the Stocks I Cover.

Stocks are undervalued but the Technicals warn!

Documents

Transcript of Stocks are undervalued but the Technicals warn!