Fundamentally the stock market remains under a ValuEngine valuation warning with 68.7% of all stocks overvalued. We still show that 15 of 16 sectors are overvalued, 12 by double-digit percentages. We also show that 31.0% of all stocks are overvalued by 20% or more.
The computer and technology sector is the most overvalued by 21.8%. Among the semiconductor industries, analog and mixed semis are 10.4% overvalued, communication semis are 9.6% overvalued, equipment wafer semis are 26.2% overvalued and general semis are 37.0% overvalued.
There was better than expected economic data on Tuesday, which helped the stock market rebound. Durable Goods Orders were stronger than expected as was New Home Sales and Consumer Confidence. But keep in mind that these data points were compiled before last Wednesday's FOMC meeting and the game changing idea that quantitative easing moves would be tapered off sooner rather than later.
Most notably the Conference Board's reading on Consumer Confidence rose to 81.4 in June up from 74.3 in May. While this reading is the best since the recession ended, confidence remains below the neutral range of 90 to 110 for this release.
Among the 30 semiconductor stocks in the SOX, 26 are overvalued and four are undervalued. Five are rated buy and 25 are rated hold, with one downgrade to hold and one upgrade to buy this morning. Six stocks have lost ground over the last 12 months while 23 have gained, with 18 gaining between 11.6% and 159.1%.
The 12-month projections show a potential loss of 3.9% to a potential gain of 6.6%. Only two stocks have single-digit 12-month trailing EPS. There are 15 stocks with a price-to-earnings ratio above 20.0. There are 25 stocks that are trading above their 200-day simple moving averages.
Reading the Table
OV/UN Valued: 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 12 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 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.
Value Level: 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: Price at which to enter a GTC limit order to sell on strength.
Here are the buy-and-trade parameters for the buy rated stocks in the SOX:
Broadcom ($33.72) set a 52-week high at $37.85 on May 20. My annual value level is $30.97 with an annual pivot at $32.91 and semiannual risky level at $34.87.
Cirrus Logic ($17.41) set a 2013 high at $31.97 on Jan. 10. My annual value level is $13.35 with an annual risky level at $20.74.
Hittite Microwave ($55.80) set a 52-week high at $66.97 on Feb. 22. This is the stock in the table that's been downgraded to hold from sell. My quarterly value level is $48.25 with a weekly pivot at $54.30 and monthly risky level at $62.49.
Mellanox Tech ($48.97) set a 2013 high at $65.77 on March 12. My semiannual pivot is $48.54 with a weekly risky level at $49.98.
Power Integrations ($39.85) set a 52-week high at $46.12 on Feb. 6. My quarterly value level is $34.45 with an annual risky level at $42.10.
Veeco Instruments ($35.70) set a 52-week high at $43.19 on May 29. My annual value level is $26.66 with a monthly risky level at $39.62.
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.