Woodshed Stocks Face Another Valuation Warning
Tuesday's market strength and rise in the U.S. Treasury 30-year bond yield to 3.23% pushed 65.8% of all stocks into overvalued territory. Because of this fundamental condition, ValuEngine issued another valuation warning this morning. This is the fundamental reason why investors should continue the strategy to raise cash by reducing stock holdings by at least 50% on strength to risky levels.
At www.ValuEngine.com we show 15 of 16 sectors overvalued with 11 overvalued by double-digit percentages.
The technicals for the major equity averages are even more overbought. My technical measure for momentum is the 12x3x3 weekly slow stochastic. All major averages have readings above 80.00 on a scale of zero to 100.00.
The major averages have entered my zone of major longer term risky levels. Dow transports are above my annual and semiannual pivots at 5925 and 5955 setting yet another new all-time closing high at 6020.67 on Tuesday. The other major averages are below longer term risky levels at; 14,132 and 14,323 Dow industrials, 1542.9 and 1566.9 S&P 500, 3250 Nasdaq and 965.51 Russell 2000.
Reading the Table
OV/UN Valued: Stocks with a red number are undervalued by this percentage. Those with a black number are overvalued by that percentage according to ValuEngine.
VE Rating: A "1-engine" rating is a strong sell, a "2-engine" rating is a sell, a "3-engine" rating is a hold, a "4-engine" rating is a buy and a "5-engine" rating is a strong buy.
Last 12-Month Return (%): Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.
Forecast 1-Year Return: Stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.
Value Level: Price at which to enter a GTC limit order to buy on weakness. The letters mean; W-weekly, M-monthly, Q-quarterly, S-semiannual and A-annual.
Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.
Risky Level: Price at which to enter a GTC limit order to sell on strength.
Buy-and-Trade Strategies for Today's Woodshed Stocks:
Cliffs Natural Resources (CLF) ($28.84) declined from $36.61 on Feb. 12 to $28.62 on Feb. 19 after missing EPS estimates by 16 cents earning 41 cents per share. The stock is rated a hold with a negative weekly chart profile with its five-week modified moving average at $33.55. My monthly value level is $28.53 with a weekly risky level at $34.40.