Market Hasn't Peaked
While my theme for 2013 is that stocks are a risky asset class, I have not yet called a market top.
It is difficult to call for a top in the stock market when nearly 90% of the companies I have profiled pre-earnings beat their Q4 EPS estimates. Next week I will profile another six Dow components, four home builders, Amazon (AMZN) and four other stocks that are important to track.
It's hard to be overly bearish with the four-week moving average for initial jobless claims poised to trend below the recessionary threshold of 350,000, as shown on the chart below, courtesy of dshort -- Advisor Perspectives . The four-week moving average is down to 351,750.
The weekly charts are positive or overbought for the equity averages I track. Tough to call a market top with Dow Industrials , S&P 500 and Nasdaq showing rising momentum. Dow Transports and Russell 2000 have overbought momentum on their weekly chart behind continued all-time highs almost daily.
What will it take to call a market top?
Today www.ValuEngine.com shows that 59.5% of all stocks are overvalued. When 65% or more are overvalued, I will look for a stock market top. All 16 sectors are overvalued, 8 by double-digit percentages. Typically at a market top all sectors are overvalued by double-digit percentages.
When all weekly charts become overbought for the major equity averages is will look for a market top. Daily charts are not as important as the weekly charts, but keep in mind the daily chart for Dow Transports could not be more overbought, as the 12x3x3 daily stochastic reading at 97.40 is nearly pinned at the 100.00 maximum.
If the major equity averages test their longer-term risky levels, I will begin to call for a major market top. I show quarterly and semiannual risky levels at 14,118 and 14,323 Dow Industrial Average, 1510.0 and 1566.9 S&P 500, 3274 and 3583 Nasdaq, and 913.92 and 965.51 Russell 2000. Annual and semiannual risky levels are 5925 and 5955 Dow Transports.
Tracking Dow Theory: We ended Thursday with another new all-time closing high at 5854.94 for the Dow Transportation Average. To confirm a "Dow Theory Buy Signal" the Dow Industrials need to have a daily close above its all-time closing high of 14,164.53 set on Oct. 9, 2007. It will be difficult to confirm or sustain such a signal with the Dow risky levels at 14,118 and 14,323,