5 Key Bellwether Companies To Avoid For The Foreseeable Future

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Includes: AAPL, BAC, C, CSCO, GE, QQQ, SPY
by: Steven Bauer

My five 'key bellwether' companies have always provided me with reliable guidance. All of them are super-cap securities that have earned that status. Remarkably, these few companies represent the technology, financial and industrial sectors of the market very well. They are all supported within the general market index ETF, SPDR S&P 500 (NYSEARCA:SPY). My current five bellwethers are: Apple, Inc. (NASDAQ:AAPL), Cisco Systems, Inc. (NASDAQ:CSCO), Bank of America Corp. (NYSE:BAC), Citigroup, Inc. (NYSE:C), and General Electric Company (NYSE:GE).

These fine companies will all return to be bullish again. However, not before there is more and meaningful downside. Cash is your best alternative for the foreseeable future.

My reasons for focusing, and sharing with you, "my big five" are quite simple: There is more news, more data, more attention paid to these companies than perhaps a collection of one hundred other companies. In less than a half an hour's time per day, I can gain clear perspective on the near-term direction of the marketplace.

When these companies are bullish (or bearish) many second tier companies will follow in the same suit. So, when the risk / reward ratio is equal or better, I naturally recommend the best (usually second tier companies) to my clients.

Within my methodology for investing wisely, I evaluate a large number of companies looking for the best. The best may be bullish, or the best may be bearish, or the best may me neutral; depending on the current status of the marketplace. That's one of my tricks for investing wisely that few investors take the time to consider. I use these bellwether companies because I need a reference point. The indices and indexes of the general market are good, but this group of companies is excellent. These few bellwether companies and index do the job for me very, very well.

The table below is just a quick view of the valuations for these five companies. I suggest that there are two specific areas of analytics for you to take note. The first are the results of my fundamental valuation calculations and the second offers a technical perspective.

* While these valuations are just a couple of my calculations, you will note that my target prices are all (percentage wise) much more negative than positive. Currently, my divergences are also all in the negative zone. Perhaps your question is, or you would like to know - why? It is because my valuation work is the collection of data and doing calculations. At this time, in the marketplace, all are currently much more negative than positive. This happens to be coincident with the S&P Corp. and Haver Analytics current over-all valuation of the entire S&P 500 index.

* You will notice that I have embedded a hyperlink under each target price (chart). You can click and get a current look at each company's price history for the past twenty years. For me, that is of critical importance. As for relative strength, is the company currently over-valued or over-bought, between or just the opposite? As for the trend or direction, is the company currently going-to or coming-from? Is the company out-performing or under-performing the SPY index? Shorter-term charts are also of vital importance to wise investing. However, and as you know, short-term charts can get you in big trouble very quickly.

I have mentioned in my recent articles that the signals were suggesting that overall industry growth is slowing. There seems to be a flow of early warnings regarding revenue and earnings growth dropping off. Longer-term projections confirm that this negative trend may continue a year or more.

Conservative valuation analytics nearly always accurately anticipates the short-term direction of a company's share price.

Valuation Summary for: Apple, Inc.

Current Price:

$580.00

Comments: These are not bullish Valuations and Target Price Projections. The Valuation Divergence is currently negative.

My technicals are also currently "not bullish."

Consensus opinion is still very positive but this data is not ever going to be a leading indicator.

This suggests that AAPL will continue to follow the general market indices.

I do not recommend buying AAPL due my forecast of a general market bearish cycle.

Target Price:

((Click (chart) for a 20-year chart)

Plus 7+% / minus 22+% from the current price.

Valuation Divergence:

(minus) - 24+% from current the price.

Valuation Summary for: Cisco Systems, Inc.

Current Price:

$17.00

Comments: These are not bullish Valuations and Target Price Projections. The Valuation Divergence is currently negative.

My technicals are also currently "not bullish."

Consensus opinion is still very positive but this data is not ever going to be a leading indicator.

This suggests that CSCO will continue to follow the general market indices.

I do not recommend buying CSCO due my forecast of a general market bearish cycle.

Target Price:

((Click (chart) for a 20-year chart)

Plus 10+% / minus 14+% from the current price.

Valuation Divergence:

(minus) - 19+% from current the price.

Valuation Summary for: Bank of America Corp.

Current Price:

$8.00

Comments: These are not bullish Valuations and Target Price Projections. The Valuation Divergence is currently negative.

My technicals are also currently "not bullish."

Consensus opinion is still very positive but this data is not ever going to be a leading indicator.

This suggests that BAC will continue to follow the general market indices.

I do not recommend buying BAC due my forecast of a general market bearish cycle.

Target Price:

((Click (chart) for a 20-year chart)

Plus 10+% / minus 24+% from the current price.

Valuation Divergence:

(minus) - 26+% from current the price.

Valuation Summary for: Citigroup, Inc.

Current Price:

$28.00

Comments: These are not bullish Valuations and Target Price Projections. The Valuation Divergence is currently negative.

My technicals are also currently "not bullish."

Consensus opinion is still very positive but this data is not ever going to be a leading indicator.

This suggests that Citigroup will continue to follow the general market indices.

I do not recommend buying Citigroup due my forecast of a general market bearish cycle.

Target Price:

((Click (chart) for a 20 -year chart)

Plus 10+% / minus 22+% from the current price.

Valuation Divergence:

(minus) - 24+% from current the price.

Valuation Summary for: General Electric Company

Current Price:

$19.00

Comments: These are not bullish Valuations and Target Price Projections. The Valuation Divergence is currently negative.

My technicals are also currently "not bullish."

Consensus opinion is still very positive but this data is not ever going to be a leading indicator.

This suggests that GE will continue to follow the general market indices.

I do not recommend buying GE due my forecast of a general market bearish cycle.

Target Price:

((Click (chart) for a 20-year chart)

Plus 5+% / minus 22+% from the current price.

Valuation Divergence:

(minus) - 26+% from current the price.

Source of raw data: Finviz.

Composite Charts

My criterion for taking a bullish position is that the company must have the prospect within its fundamental valuation and technical chart to outperform the general market, its sector, and industry group.

Market Status

I use several indices in my focus to identify the on-going bullish and bearish inflection points. The New York Composite Index is represented well by the ETF, SPDR S&P 500 SPY. The Nasdaq Composite Index is represented well by the ETF, PowerShares QQQ Trust (NASDAQ:QQQ). In my work the identification of bullish and bearish inflection points is of critical importance. Because this is so critical, I also emphasize and use market "breadth" indices. Breadth does not have a tracking ETF; therefore, it was necessary to create my own excel charts.

These two indices, backed up with 'breadth,' is the foundation for my technical analysis. An axiom for the general market says: "the direction (trend) of the general market has a 60% influence on security's profits or losses." The following two charts (long and short-term) include SPY, QQQ and two of the companies presented in this article. I hope you can understand why this analytic exercise is so important to my way of managing assets.

My opinion is that the fundamentals are over-valued; the technicals are over-bought, and the consensus opinion is way too bullish. I am currently a bear because my valuations are convincingly negative, and we are in a bearish cycle; it's just that simple!

Further support for my guidance for the general market can be read in my weekly Instablog article "Wednesday - General Market Update & Commentary."

Summary

Currently, the above tables and charts present a clear and not-so-positive account of these five companies and the overall market indicators. It is a fact that, the stock market cycles endlessly both fundamentally and technically from bullish to bearish and then back to bullish again. Unfortunately, this is a pattern that is not well-understood or taken advantage of by most investors.

Within this present bearish time frame, there is nothing (longer-term) wrong with these companies. It is simple what happens when they turn bearish, and is just the on-going "cycling effect" of the way the stock market works. I hope you understand and will continue to follow my work / analytics. It won't be long before I can offer you a bullish and up-beat forecast once again.

May I remind you to take a few minutes to study my 5 and 20-year charts? When buying or selling, taking a longer-term view of a security's price history is often the difference between profits and losses.

Conclusion

I am bearish on both the world economies and the general market. My more recent Instablog postings are focused on securities that should not be currently held in your portfolio. I suggest that it is vitally important for you to understand that holding cash during questionable time frames in the marketplace is a much wiser choice than holding your present positions. I can assure you that this is definitely a "questionable" time frame.

Further and on-going support for some of these companies' current status will be posted this coming Saturday.

Have fun, investing wisely.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.