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ValuEngine Valuations are Positive but the Forecasting Model is Cautious.

|Includes: DIA, GLD, JPM, QQQ, SPY, iShares 20+ Year Treasury Bond ETF (TLT), TRV
ValuEngine shows that 74.8% of all stocks are undervalued fundamentally, but the main reason is that the 30-Year bond yield is below 3.00%. The ValuEngine forecasting model tells a more conservative story as only six of the 30 Dow components are rated a BUY and none are expected to gain more than 9% over the next twelve months. Two components JP Morgan (NYSE:JPM) and Travelers (NYSE:TRV) ended last week with SELL ratings. The important Regional Banking Index (BKX) is up 10.3% year to date after being down 24.6% in 2011. None of the components of the BKX are rated a BUY and six are rated SELL. Technically the BKX has a positive weekly chart. My analysis suggests that stocks are vulnerable, so if there is a technical breakout it is highly likely to be a false rally similar to last year. The Dow Industrial Average ended last week between my annual pivot at 12,312 and my quarterly pivot at 12,478, and an open today above 12,500, which is on the down trend connecting the highs of May and July 2011, will be considered a breakout. The yield on the 10-Year has tested my semiannual pivot at 1.903. Gold opens this week above my semiannual pivot at $1659.4. Crude oil failed at the low end of my zone of annual and semiannual risky levels at $103.58 and $104.84, but held its 50-day simple moving average at $98.77. The euro versus the dollar hit a 52-week low at 1.2629 on Friday with my quarterly value level at 1.2499, my monthly pivot at 1.2780 and semiannual pivot at 1.2980.
 
The Major Equity Averages
Market
13-Jan
YTD
30-Dec
2011
Date of
Oct-11
% Off
% Off
% From
Price
Gains
Price
Highs
Highs
Lows
Highs
Lows
Hi to Lo
The Dow
12,422.00
1.7%
12,218.00
12,876.00
2-May-11
10,404.49
-3.5%
19.4%
-19.2%
S&P 500
1,289.10
2.5%
1,257.60
1,370.58
2-May-11
1,074.77
-5.9%
19.9%
-21.6%
Nasdaq
2,711.00
4.1%
2,605.00
2,887.75
2-May-11
2,298.89
-6.1%
17.9%
-20.4%
Naz 100 (NDX)
2,372.00
4.1%
2,278.00
2,437.42
25-Jul-11
2,034.92
-2.7%
16.6%
-16.5%
Transports
5,176.00
3.1%
5,020.00
5,627.85
7-Jul-11
3,950.66
-8.0%
31.0%
-29.8%
Russell 2000
764.25
3.2%
740.91
868.57
2-May-11
601.71
-12.0%
27.0%
-30.7%
Semis (SOX)
383.47
5.2%
364.44
450.79
2-May-11
322.24
-14.9%
19.0%
-28.5%
 

10-Year Note – (1.865) Daily and annual value levels are 1.920 and 2.502 with weekly and semiannual pivots at 1.880 and 1.903, and quarterly, monthly and semiannual risky levels at 1.687, 1.409 and 1.385.
 
 
Courtesy of Thomson / Reuters
 
Comex Gold – ($1639.3) Annual and weekly value levels are $1575.8, $1388.4 and $1569.2 with semiannual pivots at $1635.8 and $1659.5, and monthly and quarterly risky levels at $1706.7 and $1740.9.
 
Courtesy of Thomson / Reuters
 
Nymex Crude Oil ($99.27) My semiannual and monthly value levels are $79.83 and $75.53 with monthly, daily and weekly pivots at $99.87, $98.93 and $100.40, and semiannual and annual risky levels at $104.84, and $103.58 and $117.00.
 
 
Courtesy of Thomson / Reuters
 
The Euro – (1.2680) Weekly, daily, quarterly and weekly value levels are 1.2506, 1.2484, 1.2499 and 1.2467 with monthly and semiannual pivots at 1.2780 and 1.2980, and annual and semiannual risky levels at 1.4239 and 1.4405.
 
Courtesy of Thomson / Reuters
 
The Major Equity Averages - All daily charts are overbought and the weekly charts are either overbought, or will be soon. To review; The Dow Industrial Average has been influenced by my annual and quarterly pivots at 12,312 and 12,478 and has tested the down trend connecting the highs of May and July 2011 at the 12,500 area. The other major averages have stayed below their quarterly risky levels at; 1305.4 SPX, 2777 NASDAQ, 2422 NDX, 5448 Dow Transports, 829.03 Russell 2000, and 390.17 SOX. Monthly value levels lag at; 11,210 Dow Industrials, 1152.8 SPX, 2432 NASDAQ, 2185 NDX, 4443 Dow Transports, 646.71 Russell 2000, and 310.48 SOX.
 
Weekly Dow: (12,422) The 200-week simple moving average is 10,613 with the five-week modified moving average at 12,130, my annual, weekly and quarterly pivots at 12,312, 12,430 and 12,478, and quarterly and annual risky levels at 12,796 and 14,032. The weekly chart stays positive but overbought with a weekly close above the 5-week MMA and with overbought MOJO. The downtrend going back to the May and July 2011 highs is being tested at 12,500.
.
Courtesy of Thomson / Reuters
 
S&P 500 (1289.1) Monthly and semiannual value levels are 1152.8, 841.7 and 829.9 with weekly and daily pivots at 1285.8 and 1295.2, and quarterly and annual risky levels at 1305.4, 1363.2 and 1562.9.
 
NASDAQ (2711) Weekly, monthly and semiannual value levels are 2670, 2432, 2012 and 1952 with my annual pivot at 2698, and daily, quarterly and annual risky levels at 2735, 2777 and 3232.
 
NASDAQ 100 (NDX) (2372) Weekly, annual, monthly and semiannual value levels are 2341, 2300, 2185, 1851 and 1743 with daily, quarterly and annual risky levels at 2401, 2422 and 2603.
 
Dow Transports (5176) Monthly and semiannual value levels are 4443, 4407 and 3778 with weekly and daily pivots at 5123 and 5213, and quarterly and annual risky levels at 5448, 5861 and 6111.
 
Russell 2000 (764.25) Monthly and semiannual value levels are 646.71, 572.90 and 510.81 with weekly and daily pivots at 755.22 and 766.35, and quarterly and annual risky levels at 829.03, 836.15 and 969.09.
 
The SOX– (383.47) Weekly, monthly, annual and semiannual value levels are 367.06, 310.48, 269.80, 277.90 and 194.47 with a quarterly pivot at 390.17, and daily and annual risky levels at 394.40 and 520.61.
 
ValuEngine Valuation Model – Stocks remain fundamentally cheap.
  • 74.8% of all stocks are undervalued / 25.2% of all stocks are overvalued. On October 4th - 93.5% of all stocks were undervalued. Keep in mind that with the 30-Year bond yield below 3.00% and with about 70% of stocks undervalued this market tends to top out.
  • All sixteen sectors are undervalued, fourteen by double-digit percentages (10.8% to 17.9%). Back in March 2009 the sectors were undervalued by 33% to 45%. – Check out and subscribe to www.ValuEngine.com.
 
ValuEngine Forecasting Model – The STRONG BUYS and BUYS are mostly speculative names.
1.      307 STRONG SELLS – Notable symbols – CS, BCS, DB and MS.
2.      1649 SELLS – Notable symbols – C, GS and JPM.
3.      3587 HOLDS
4.      1254 BUYS – Only 187 are projected to gain 7.5% or more over the next twelve months.
5.      133 STRONG BUYS – 46 trade below $10.00 / share.


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