Random Trading Continues

TheStreet.com

NEW YORK (TheStreet) -- To confirm the May 22/May 20 highs as cycle highs for the five major equity averages, there needs to be simultaneous weekly closes below all five-week modified moving averages.

The five-week MMAs are 14,973 Dow Industrials; 1613.8 S&P 500; 3397 Nasdaq, 6242; Dow Transports; and 971.81 Russell 2000.

While we wait for a moving average confirmation, random trading will continue as there's a wide range between new quarterly value levels and new monthly risky levels. My quarterly value levels are 14,288 Dow Industrials; 1525.6 S&P 500; 3284 Nasdaq; 5348 Dow Transports; and 863.05 on the Russell 2000.

The risky levels for July are 15,437 Dow Industrials; 1669.0 S&P 500; 3510 Nasdaq; 6758 Dow Transports; and 1030.75 Russell 2000. These risky levels straddle the May 20/May 22 highs at 15,542.40 Dow Industrials; 1687.18 S&P 500; 3532.04 Nasdaq; 6568.41 Dow Transports; and 1008.23 Russell 2000.

Weekly closes above the monthly risky levels on Dow Industrials, and S&P 500 and Nasdaq set the stage for new all time or multiyear highs. Weekly closes below the quarterly value levels indicates risk to my annual value levels at 12,696 Dow Industrials, 1348.3 S&P 500, 2806 Nasdaq and 809.54 Russell 2000.

Without confirming a market top for the major equity averages, the June 24 lows should be the low end of the trading ranges at; 14,551.27 on Dow Industrials; 1560.33 S&P 500; 3294.95 Nasdaq; 5952.18 Dow Transports; and 942.79 Russell 2000.

The bottom line is that the low ends of the trading ranges have been set on comments by Federal Reserve officials that quantitative easing will continue. The upside should be limited to monthly risky levels as the extent of continued money printing has been anticipated. Tapering is thus a market consideration, and that limits the upside potential. Remember that stocks are trading under a ValuEngine valuation warning and that the weekly chart profiles could turn negative this week.

If you are maintaining core holdings in buy-rated Dow stocks, the list is down to these eight:

Reading the Table

OV / UN Valued - The stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.

VE Rating - A "1-Engine" rating is a Strong Sell, a "2-Engine" rating is a Sell, a "3-Engine" rating is a Hold, a "4-Engine" rating is a Buy and a "5-Engine" rating is a Strong Buy.

Last 12-Month Return (%) - Stocks with a Red number declined by that percentage over the last twelve months. Stocks with a Black number increased by that percentage.

Forecast 1-Year Return - Stocks with a Red number are projected to decline by that percentage over the next twelve months. Stocks with a Black number in the Table are projected to move higher by that percentage over the next twelve months.

Value Level: is the price at which to enter a GTC Limit Order to buy on weakness. The letters mean; W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: is the price at which to enter a GTC Limit Order to sell on strength.

Home Depot ($77.73) traded as low as $72.41 on June 24. My semiannual value level is $74.17 with a quarterly risky level at $80.48 versus the multiyear high at $81.56 set on May 22.

Hewlett Packard ($25.18) traded as low as $23.19 on June 24. My semiannual value level is $24.24 with a monthly pivot at $26.67 and semiannual risky level at $29.69.

Coca Cola ($40.49) traded as low as $38.97 on June 20. My weekly value level is $39.78 with a monthly pivot at $41.29 and quarterly risky level at $42.46 versus the multi-year high at $43.43 set on May 16.

McDonald's ($100.35) traded as low as $95.16 on June 6. My weekly value level is $94.98 with an annual pivot at $99.38 and annual risky level at $104.63 versus the multiyear high at $103.70 set on April 12.

AT&T ($35.62) traded as low as $34.10 on June 21. My semiannual value level is $32.14 with the 200-day SMA at $35.75, my quarterly pivot at $36.27 and annual risky level at $39.86 versus the multiyear high at $39 set on April 23.

United Technologies ($94.73) traded as low as $90.30 on June 24. My annual value level is $90.05 with a semiannual risky level at $96.86 versus the multiyear high at $98.18 set on May 22.

Verizon Communications ($51.01) traded as low as $47.77 on June 3. My semiannual value level is $49.86 with a monthly pivot at $50.86 and quarterly risky level at $51.27 versus the multiyear high at $54.31 set on April 30.

Wal-Mart ($74.76) traded as low as $72.90 on June 24 versus the 200-day SMA at $73.46. My monthly value level is $71.06 with a semiannual pivot at $74.96 and quarterly risky level at $82.06 versus the multiyear high at $79.96 set on May 15.

At the time of publication the author held no positions in any of the stocks mentioned.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

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