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A Rising 30-Year Bond Yield Is A Drag On Equity Valuations.

|Includes: DIA, GLD, QQQ, SPY, iShares 20+ Year Treasury Bond ETF (TLT), XLE
The yield on the 30-Year Bond is cheaper than my semiannual pivot at 3.225 which indicates risk to my annual value level at 3.756. Back on October 4th ValuEngine showed 93.5% of all stocks undervalued. Today the pendulum swings to having 50.5% of all stocks overvalued. While this stage is set, new "Year to Date" highs occurred for the Dow Industrial Average, S&P 500 & NASDAQ on Wednesday at 13,221.27, 1399.42, and 3051.23 respectively. The Dow Transports and Russell 2000 did not participate in this strength as those all time highs set in 2011 at 5627.85 on July 7, 2011 and 868.57 on May 2, 2011 appear to be unachievable. Weekly closes above my annual pivot at 1363.2 SPX indicates potential strength to weekly risky levels at; 13,311 Dow Industrials, 1412.6 SPX, 3130 NASDAQ, 5293 Dow Transports and 836.15 "A" on Russell 2000. The yield on the 10-Year US Treasury tested its 200-day simple moving average at 2.224. It seems like the yield complex almost always tests its 200-day during a calendar year. Gold is below its 50-day and 200-day simple moving averages at $1702.2 and $1678.5 and traded down to my semiannual pivot at $1635.8 on Wednesday. Crude oil remains below this week's pivot is $107.27. The euro vs the dollar remains above its semiannual pivot at 1.2980.

10-Year Note - (2.279) My annual value level is 2.502 with daily, weekly, semiannual and quarterly risky levels at 2.169, 2.097, 1.903 and 1.687.

Courtesy of Thomson / Reuters

Comex Gold - ($1643.0) My annual value level is $1575.8 with semiannual and daily pivots at $1659.5, $1635.8 and $1651.6, and quarterly, weekly and monthly risky levels at $1740.9, $1808.4 and $1888.4.

Courtesy of Thomson / Reuters

Nymex Crude Oil - ($105.68) Semiannual, annual, quarterly, monthly and semiannual value levels are $104.84, $103.58, $99.87, $97.96 and $79.83 with daily and weekly pivots at $105.93 and $107.27 and my annual risky level at $117.00.

Courtesy of Thomson / Reuters

The Euro - (1.3023) Semiannual, monthly, and quarterly value levels are 1.2980, 1.2622, and 1.2499 with a daily pivot at 1.3048, and weekly, annual and semiannual risky levels at 1.3650, 1.4239 and 1.4405.

Courtesy of Thomson / Reuters

Daily Dow: (13,194) Daily, quarterly, annual, monthly and semiannual value levels are 13,004, 12,478, 12,312, 11,903, 8,425 and 8,336 with weekly and annual risky levels at 13,311 and 14,032.

Courtesy of Thomson / Reuters

S&P 500 - (1394.3) Daily, annual, quarterly, monthly and semiannual value levels are 1375.4, 1363.2, 1305.4, 1222.5, 841.7 and 829.9, and weekly and annual risky levels at 1412.6 and 1562.9.

NASDAQ - (3041) Daily, quarterly, annual, monthly and semiannual value levels are 2993, 2777, 2698, 2651, 2012 and 1952 with weekly and annual risky levels at 3130 and 3232.

NASDAQ 100 (NDX) - (2708) Daily, annual, monthly, quarterly, annual and semiannual value levels are 2660, 2603, 2428, 2422, 2300, 1851 and 1743 with my weekly risky level at 2761.

Dow Transports - (5180) Daily, monthly and semiannual value levels are 5132, 4470, 4407 and 3778 with weekly, quarterly, and annual risky levels at 5293, 5448, 5861 and 6111. The all time high was set at 5627.85 on July 11, 2011.

Russell 2000 - (823.41) Daily, monthly and semiannual value levels are 820.32, 684.13, 572.90 and 510.81 with quarterly pivots at 824.46 and 829.03, and annual and weekly risky levels at 836.15 and 862.39. The all time high was set at 868.57 on May 2, 2011.

The SOX- (426.65) Daily, quarterly, monthly, annual and semiannual value levels are 417.23, 390.17, 323.52, 269.80, 277.90 and 194.47 with weekly and annual risky levels at 460.47 and 520.61. The 2011 high is 474.33 set on February 18, 2011.

ValuEngine Valuation Model: Monthly benchmark revisions are favorable for stocks.
 

  • 49.5% of all stocks are undervalued / 50.5% of all stocks are overvalued. Back on October 4th - 93.5% of all stocks were undervalued.
  • Fifteen of sixteen sectors are overvalued; four by double-digit percentages. Finance by 21.1%, Computers & Technology by 18.1%, Retail-Wholesale by 16.4% and Medical by 11.8%. Back in March 2009 all sectors were undervalued by 33% to 45%.
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Definition of MOJO - This is my term for technical momentum. I use what's called "12x3x3 slow stochastic readings" from daily, weekly and monthly charts. The scale is zero to 10.0 where above 8.0 is overbought and below 2.0 is oversold.

Buy and Trade Strategies for Long Positions
 

  • Value Level - The price at which you establish an additional long position on share price weakness. This is done on a GTC Limit Order to buy weakness to the Value Level.
  • Risky Level - The price at which you remove a single long position or reduce a multiple long position on share price strength. This is done on a GTC Limit Order to sell strength to the Risky Level.

Buy and Trade Strategies for Short Positions
 

  • Value Level - The price at which you remove a single short position or reduce a multiple short position on share price weakness. This is done on a GTC Limit Order to buy weakness to the Value Level.
  • Risky Level - The price at which you establish an addition short position on share price strength. This is done on a GTC Limit Order to sell strength to the Risky Level.

Richard Suttmeier
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As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website 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 to http://www.valuengine.com/nl/mainnl to review sample issues and find out more about my research.

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