The Dow is higher despite the ValuEngine Valuation Warning

 

The ValuEngine Valuation Warning – All sixteen sectors are overvalued, and less than 35% of all stocks are undervalued. In this environment the Dow Industrial Average is overbought on monthly, weekly and daily charts, and tested this week’s risky level at 11,858. The other major equity averages are lagging week’s risky levels at 1304.9 SPX, 2802 NASDAQ, 5331 Transports and 835.88 on Russell 2000. The NASDAQ has a quarterly risky level at 2853.

 

The yield on the 10-Year US Treasury note is still trading between this week’s value level at 3.609 and with the five-week modified moving average at 3.184.

 

Comex gold continues to trade between my annual value level at $1356.5 and its 50-day simple moving average at $1384.1.

 

Nymex crude oil is above its semiannual value level at $87.52 with this week’s risky level at $96.45.

 

The euro versus the dollar is holding above my quarterly pivot at 1.3227, which has been a strong magnet in January.

 

Bank Failure Friday – The FDIC closed a total of 157 banks in 2010; 41 in the first quarter, 45 in the second quarter, 41 in the third quarter and 30 in the fourth quarter.

·        25 banks failed in 2008

·        140 banks failed in 2009 with a peak of 50 in the third quarter

·        157 banks failed in 2010

·        3 banks have failed year to date in 2011

·        325 banks have failed since the end of 2007

·        I still predict 500 to 800 bank failures in total by the end of 2012 into 2013.

 

Comerica (CMA) to buy Sterling Bancshares (SBIB) in a stock deal that values Sterling at $1.03 billion or $10 a share, which is a 30% premium to Friday’s closing price. My analysis suggests that Comerica overpaid for Sterling.

 

Comerica (CMA) ($38.88) is rated a HOLD according to ValuEngine with fair value at $34.47 and a one-year price target at $41.66.My annual value level is $34.02 with a weekly risky level at $44.74. The stock declined on Tuesday to trade between its 200-day and 50-day simple moving averages at $38.65 and $39.91. This $55 billion bank has limited exposures to Commercial Real Estate loans with a pipeline that’s 73.6% funded.

 

Sterling Bancshares (SBIB) ($8.97) is rated a HOLD according to ValuEngine with fair value at $4.93 and a one-year price target at $7.34, which shows that Comerica overpaid for this $5 billion bank. Sterling is slightly overexposed to CRE loans at 349.2% of risk-based capital, and the Sterling bid at $10 per share is above my annual risky level at $9.51.

 

Homebuilder Confidence remains depressed at 16 in January – Remember that 50 is the neutral level for this measure.

·        Builders site the lack of construction financing, widespread difficulties in obtaining accurate home appraisals.

·        Housing remains the an economic drag as job concerns remain on Main Street USA.

 

 

That’s today’s Four in Four. Have a great day.

 

Richard Suttmeier
Chief Market Strategist

ValuEngine.com, [phone]

 

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As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters as well as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. You can go HERE to review sample issues and find out more about my research.

 

“I Hold No Positions in the Stocks I Cover.”