Bernanke Does the Expected and Then Some
In the major equity averages, the Dow Industrial Average, S&P 500 and Nasdaq reached new multi-year highs at 13,495.65, 1,455.43 and 3,158.19 respectively. Dow Transports lagged, but remained solidly above its key five-week modified moving average at 5094 with its July 2011 all time high at 5627.85. The Russell 2000 had a solid gain and its May 2011 all time high at 868.57 is now on the radar screen.
Higher stock prices and the higher 30-Year bond yield continue to make stocks less undervalued and more overvalued. This morning www.ValuEngine.com shows that only 50.1% of all stocks are undervalued. At the June 4 market lows, 81.0% of all stocks were undervalued.
Thirteen of 16 sectors are overvalued and next week I will cover the five most overvalued sectors; utilities is overvalued by 17.7%, Retail-Wholesale by 14.1%, Finance by 13.6%, Consumer Staples by 13.5% and Medical by 13.4%.
Analysis of the Yield on the 10-Year Treasury Note (1.739): The weekly chart for the U.S. Treasury 10-year still favors a rising trend for yields if today's close is above the five-week modified moving average at 1.637%. Even so, this yield should remain between my semiannual and quarterly value levels at 1.853%/1.869% and my semiannual risky level at 1.389% with my monthly pivot at 1.645%. This week's pivot at 1.756% was a stabilizing influence after this yield tested and held its 200-day simple moving average at 1.832% in reaction to the Fed Statement.
Analysis of Comex Gold ($1,768.2): The weekly chart for gold is now positive but overbought with the five-week modified moving average at $1,655.7. My semiannual pivots are now value levels at $1,702.5 and $1,643.3 with my monthly pivot at $1,753.7 and my quarterly risky level at $1,805.8 at which I recommend some profit-taking.
Analysis of Nymex Crude Oil ($98.10): The weekly chart for crude oil is now positive but overbought with the five-week modified moving average at $93.58. My monthly value level is $93.30 per barrel with my annual and quarterly risky levels at $103.58 and $107.63. I have been tracking the battle to break out above its 200-day simple moving average at $96.61 and this occurred after the Fed statement as expected.