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Message: What to Watch as Markets Approach End of 2010
What to Watch as Markets Approach End of 2010
By Richard Suttmeier Dec 27, 2010 8:40 am
This week the focus is 2-Year, 5-Year, and 7-Year auctions today through Wednesday, Consumer Confidence on Tuesday, and Chicago PMI and Pending Home Sales on Thursday.
US stocks tacked on some decent gains during the four days before Christmas Eve. The Dow Jones Industrial Average tacked on 81 points to 11,573 with the Nasdaq up 23 points to 2666, now down only 6.8% from its October 2007 highs. The US Treasury bond yield rose to 4.47, which is a drag on equity valuations. Comex gold drifted higher to $1380.7, while Nymex crude oil surged to $91.55, giving the gift of $3.00 per gallon regular gasoline. All of this price action occurred despite a stronger dollar. This week the focus is 2-Year, 5-Year, and 7-Year auctions today through Wednesday, Consumer Confidence on Tuesday, and Chicago PMI and Pending Home Sales on Thursday. Friday we wish all a Happy New Year.
Tracking the US Capital Markets -- US stocks are overvalued fundamentally and overbought technically on both daily and weekly charts.
- The major equity averages face weekly risky levels as the year draws to a close at: 11,629 Dow, 1269.4 SPX, 2682 Nasdaq, 5215 Dow Transports, and 808.57 Russell 2000.
- Fifteen of 16 sectors are overvalued according to ValuEngine with only 37.1% of all stocks undervalued. At 35% the stock market tends to find a top. Only 17.5% of all stocks are undervalued by 20% or more.
- When I look at the Index ETFs presented in ValuEngine’s Weekly ETF Report I find the long ETFs with extreme weekly overbought readings with the inverse ETFs extremely oversold. When I look at the Sector ETFs, the only ones not extremely overbought are Financials (XLF) and Utilities (XLU). And I see negative divergences from Emerging Markets (EEM) and the China 25 Fund (FXI), with FXI actually having a negative weekly chart profile.
- When I screen for long candidates for the ValuTrader Model Portfolio I come up empty with only 20 stocks rated Buy, 5.5% undervalued and projected to gain at least 7.5% over the next 12 months. I limited the screen to market cap at least $5.5 billion and priced above $10.00.
The Yield on the 10-Year Note (3.397) -- This week’s value level is 3.494 with the 200-day at 3.068.
Comex Gold ($1380.7) -- The 50-day is $1371.7 with this week’s risky level at $1401.2.
Nymex Crude Oil ($91.55) -- The 50-day is $85.23 with this week’s risky level at $93.28.
The Euro (1.3113) -- My weekly value level is 1.2906 with 50-day at 1.3089 and pivot at 1.3318.
The Dow Industrial Average (11,573) -- The five-week MMA is 11,312 with weekly risky level at 11,629.
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