McDonald's and Netflix Headline Monday's Earnings
The stock market remains overvalued fundamentally but the technicals suggested new highs. This marks the third time this year that cycle highs could not be confirmed. When that happens new highs will likely follow, and that's the case except for Dow Industrials and Dow Transports.
As the Market Pulse below shows, Transports closed just below its Sept. 20 all-time intra-day high at 6754.81 with Industrials below its Sept. 18 all-time intra-day high at 15,709.59. Note the series of new highs set Thursday on five of the averages in the table.
The Nasdaq is above semiannual and monthly pivots at 3759 and 3830 and the Russell 2000 is above semiannual and monthly pivots at 1089.42 and 1092.46.
Monthly, semiannual and quarterly risky levels are 15,932, 16,490 and 16,775 Dow Industrials; 1746.4, 1743.5 and 1853.8 S&P 500; 4025 Nasdaq; 6811, 7104 and 7205 Dow Transports; and 1163.21 Russell 2000.
The ValuEngine valuation warning continues with 77.7% of all stocks being overvalued, 44.6% by 20% or more. In addition, 15 of 16 sectors are overvalued -- 14 by double-digit percentages, nine by 21.1% to 26.5%.
The retail-wholesale sector is 26.5% overvalued with an overweight rating; 80.3% of the 351 stocks in this sector have buy or strong buy ratings.
The computer and technology sector is 24.4% overvalued with an overweight rating; 47.5% of the 1160 stocks in this sector have buy or strong buy ratings.
The consumer discretionary sector is 23.7% overvalued with an equal-weight rating; 91.5% of the 405 stocks in this sector have hold ratings.
The finance sector is 19.9% overvalued with an equal-weight rating; 80.9% of the 3061 stocks in this sector have hold ratings.
Two of the five stocks in today's table have buy ratings and three have hold ratings. All five are overvalued, with one overvalued by 113.3%. All five have gains over the last 12 months one up 381.8%. Only one stock is below its 200-day SMA with four above, which reflects the risk of reversion to the mean.