Discount Retailers Should Hold Up in a Risky Market

Tickers in this article: BIG COST DG DLTR FDO ROST TGT TJX WMT
NEW YORK (TheStreet) -- The stock market has been under the cloud of a ValuEngine valuation warning since the major equity averages set new all time highs or multi-year highs in the May 20/May 22 window.

Since these highs could not be confirmed by negative weekly chart profiles, a new set of highs were set in early August. Again these highs could not be confirmed by all five weekly charts of the major equity averages. New highs followed again between Sept. 18 to Sept. 25 and so far positive weekly charts for the Nasdaq and Russell 2000 have prevented these highs from being confirmed as the fourth quarter begins.

The Nasdaq remains influenced by my semiannual pivot at 3759 after setting a multi-year high at 3798.76 on Sept. 20. The all time highs are 15,709.59 Dow Industrials set on Sept. 18, 1729.86 S&P 500 on Sept. 19, 6754.81 Dow transports on Sept. 20 and 1082.00 Russell 2000 on Friday.

If the Nasdaq ends the week above 3759 the upside potential monthly and semiannual risky levels at 15,932/16,490 Dow Industrial Average, 1746.4/1743.5 S&P 500, 3830 Nasdaq, 6811/7104 Dow transports and 1092.46/1089.42 Russell 2000.

Given a weekly close below 3759 on the Nasdaq, stocks become vulnerable towards annual value levels at 12,696 Dow Industrials, 1348.3 S&P 500, 2806 Nasdaq, 5469 Dow transports, and 809.54 Russell 2000. This week's value levels are 14,696 Dow Industrials, 1641.5 S&P 500, 3695 Nasdaq, 6318 Dow transports and 1034.93 Russell 2000.

I have liked the prospects for the discount retailers throughout this period and they continue to perform well and maintain buy ratings. On June 3 I wrote Discount Retailers Track Slow Consumer Spending.

Since then seven of the nine buy-rated names gained into my next post on Sept. 5, Big Lots, Dollar General, Costco, Remain Buy Rated. All nine have maintained a buy rating and six of nine continued to gain into today's post.

All nine stocks continue to have buy ratings and are overvalued by 3.5% to 23.2%. All have gained over the last 12 months five by 12.7% to 25.9%. Two are below their 200-day simple moving averages and seven are above reflecting the risk of a reversion to the mean. Today's table includes new monthly and quarterly levels where designated.