On Tuesday the Dow industrial average traded below my monthly pivot at 15,437, but the close that day was above that milestone. This was a key to the climb to new highs as Fed Chief Bernanke provided dovish comments to the House on Wednesday then to the Senate on Thursday.
After the close on Thursday disappointing earnings from an old technology stock Microsoft
In my opinion it will be difficult to continue these new all-time highs given the severity of the ValuEngine valuation warning. Today 76.1% of all stocks are overvalued with 43.6% overvalued by 20% or more. We show that 15 of 16 sectors are overvalued, 13 by double-digit percentages.
My monthly pivots are 15,437 Dow industrials, 1669.0 S&P 500, 3510 Nasdaq and 1030.75 on the Russell 2000 with my monthly risky level at 6758 Dow transports.
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. My semiannual risky levels are 16,490 Dow industrials, 1743.5 S&P 500, 3759 Nasdaq, 7104 Dow transports and 1089.42 Russell 2000. My annual value levels are 12,696 Dow industrials, 1348.3 S&P 500, 2806 Nasdaq and 809.54 Russell 2000.
There's a lot of room between these annual value levels and the semiannual risky levels. In Dow terms the upside is 941 points, or another 6.1%. The downside is 2,853 points, or 18.3%.
Here are my asset allocation ratings for the 16 sectors at ValuEngine:
Aerospace: Underweight -- (78 stocks) Only three stocks have buy ratings and 53 stocks or 67.9% are rated strong sell or sell.
Auto-Tires-Trucks: Underweight -- (95 stocks) Only two stocks have buy ratings and 31 stocks or 32.6% are rated strong sell or sell.
Basic Materials: Underweight -- (412 stocks) Only 15 have buy ratings and 232 stocks or 56.3% are rated strong sell or sell.
Business Services: Overweight -- (248 stocks) 50 stocks or 20.2% have buy ratings and only 15 are rated sell.
Computer & Technology: Overweight -- (1184 stocks) 483 stocks or 40.8% have buy ratings and only 34 are rated sell.
Construction: Underweight -- (162 stocks) Only eight stocks have buy ratings and 82 stocks or 50.6% are rated strong sell or sell.
In this sector I track the PHLX Housing Sector Index
Consumer Discretionary: Equal-weight -- (428 stocks) Only 11 stocks have buy ratings and only 24 stocks have sell ratings.
Consumer Staples: Overweight -- (269 stocks) 139 stocks or 51.7% have buy ratings and only four have sell ratings.
A notable buy rated stock in this sector is Dow component Coca Cola
Finance: Equal-weight -- (3134 stocks) 96 stocks have buy ratings and 65 are rated sell.
The PHLX KBW Banking Index
Industrial Products: Underweight -- (361 stocks) Only 38 stocks have buy ratings and 152, or 42.2% are rated strong sell or sell.
Medical: Equal-weight -- (817 stocks) 88 stocks have buy ratings and 174 are rated sell.
Multi-Sector Conglomerates: Overweight -- (49 stocks) 36 stocks or 73.5% have buy ratings and none have sell ratings.
Two notable buy rated stocks are in this sector. Dow components 3M Company
Oils-Energy: Underweight -- (557 stocks) Only ten stocks have buy ratings and 183, or 32.9% are rated strong sell or sell.
Retail-Wholesale: Overweight -- (358 stocks) 288 stocks or 80.4% have buy ratings and only seven have sell ratings.
Transportation: Avoid source of funds -- (182 stocks) Only eight have buy ratings and 144, or 79.1% are rated strong sell or sell.
Utilities: Overweight -- (215 stocks) 57 have strong buy ratings and 135 have buy ratings, thus 192 or 89.3% are buy rated.
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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