Dow Industrials Lead, but is it just a Flight to Quality?

8/7/2019 Dow Industrials Lead, but is it just a Flight to Quality?

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Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Newtown, PA. ValuEnginecovers over 7,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks

and commentary can be found at http://www.valuengine.com/nl/mainnl

March 24, 2011 Dow Industr ia ls Lead, but is i t just a Fl ight t o Qual i t y?

The Dow Industrials are attempting to lead stocks to new highs for the year, but maybe

investors are considering these Blue Chips as a safer haven than US Treasuries? US stocksremain overvalued fundamentally with deteriorating technicals. Can the Dow Industrials powerhigher above its February 18th high at 12,391.29? Thats not my bet, as the other majoraverages lag. If I am wrong 2011 will be a re-run of 2007, as housing is weak, and the bankingsystem remains over-leveraged. If the February highs are taken out to the upside it will likelydo so despite a ValuEngine Valuation Warning. In March 2007 I thought that stocks peaked inthe first quarter, but it proved to be just housing, community banks and regional banks. If newhighs are seen than stocks will move sideways to up longer than I expect.

Stocks Remain Overvalued Fundamentally We are not operating under a ValuEngine ValuationWarning, but 57.2% of all stocks are overvalued. In addition 15 of 16 sectors are overvalued with 5 bydouble-digit percentages.

Tracking the Bearish Moving Average Crossovers This occurs when the 21-day simple movingaverage trends below the 50-day simple moving average.

Dow The 21-day and 50-day are converging as resistance at 12,041 and 12,038. SPX The 21-day and 50-day had a negative crossover on Wednesday at 1302.70 and

1304.32. NASDAQ The 21-day and 50-day crossed over on Friday at 2720 and 2742. NASDAQ 100 The 21-day and 50-day crossed over on Friday at 2297 and 2317. Dow Transports The 21-day and 50-day crossed on March 14th at 5059 and 5108. The Russell 2000 The 21-day and 50-day are still converging at 808.00 and 804.75. The SOX The 21-day and 50-day crossed over on Friday at 438.33 and 445.89.

Closes on Weekly Charts relative to the five-week modified moving averages

Dow The five-week MMA is 11,994 with declining MOJO. SPX Stays negative on a weekly close below the five-week MMA at 1299.2. NASDAQ Stays negative on a weekly close below the five-week MMA at 2725. NASDAQ 100 Stays negative on a weekly close below the five-week MMA at 2300. Dow Transports Stays negative on a weekly close below the five-week MMA at 5101. The Russell 2000 Stays negative on a weekly close below the five-week MMA at 803.96. The SOX Stays negative on a weekly close below the five-week MMA at 440.81.


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The weekly chart for the Dow Industrial Average shifts to negative this week on a weekly closebelow the five-week modified moving average at 11,994, as momentum (12x3x3 weekly slow

stochastic) will be declining under 8.0. This measure scales between zero and 10.0, where areading above 8.0 defines an overbought condition. Momentum peaked at 9.5 on February 18th

when the high for the cycle was reached at 12,391.29. My first downside target is my annualvalue level at 11,491. A weekly close below 11,491 targets semiannual value levels at 10,959then 9,449 in the second quarter. This weeks risky level is 12,271.

Courtesy of Thomson / Reuters

10-Year Note (3.352) Weekly, annual, and semiannual value levels are 3.496 and 3.796 with daily,and monthly risky levels at, 3.214 and 3.002.



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Comex Gold ($1439.4) Daily and annual value levels are $1421.7 and $1356.5 with weekly, monthland quarterly pivots at $1440.7, $1437.7 and $1441.7, and semiannual risky level at $1452.6.


Nymex Crude Oil ($105.36) Monthly, and semiannual value levels are $96.43, and $87.52 withannual and pivots at $99.91, $101.92 and $103.30, and semiannual and quarterly risky levels at

$107.14 and $110.87.



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The Euro (1.4108) Weekly and quarterly value levels are 1.4028 and 1.3227 with daily, semiannualand monthly risky levels at 1.4253, 1.4624 and 1.4637.


Daily Dow: (12,086)Daily, annual, quarterly, semiannual, and semiannual value levels are 11,805,11,491, 11,395, 10,959, and 9,449 with weekly, monthly and annual risky levels at 12,271, 12,741 and13,890.



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Key Levels for the Major Equity Averages The Dow Industrial Average (12,086) Daily and annual value levels are 11,805 and 11,491

with weekly and monthly risky levels at 12,271 and 12,741. The Dow is 2.5% below itsFebruary 18thhigh at 12,391.29. The S&P 500 (1297.5) Daily and annual value levels are 1268.0 and 1210.7 with my quarterly

pivot at 1262.5, and weekly and monthly risky levels at 1330.7 and 1381.3. SPX is 3.5% belowits February high at 1,344.07.

The NASDAQ (2698) My daily value level is 2626 with weekly, quarterly and monthly riskylevels at 2792, 2853 and 2926. Semiannual and annual value levels are 2363, 2335 and 2172.The NASDAQ is 5.0% below its February high at 2840.51.

The NASDAQ 100 (NDX) (2270) My daily value level is 2203 with weekly, quarterly, andmonthly risky levels at 2360, 2438 and 2499. Semiannual value levels are 2006.8 and 1927.6.NDX is 5.5% below its February high at 2,403.52.

Dow Transports (5097) Daily and quarterly value levels are 4997 and 4671 with weekly andannual pivots at 5164 and 5179. Transports are 4.0% below its February high at 5306.65. The Russell 2000 (811.24) Daily, annual and quarterly value levels are 796.22, 784.16 and

765.50 with weekly and monthly risky levels at 842.72 and 850.79. Semiannual value levels are631.62 and 567.74. The Russell 2000 is 3.2% below its February high at 838.00.

The Philadelphia Semiconductor Index (SOX) (426.92) My daily value level is 417.00 withmonthly, weekly, and quarterly risky levels at 453.89, 462.98 and 465.93. Semiannual andannual value levels are 296.89, 270.98 and 259.30. The SOX is 10.0% below its Februaryhigh at 474.33.

New Home Sales were At a Record Low in February Sales of new single-family homes plunged16.9% in February to a record low seasonally adjusted annual rate of 250,000 units. There seems tobe a major disconnect between the slowly improving labor market and the continued decline inhousing prices and sales of both existing and new home sales. The National Association of HomeBuilders attributed this anomaly to consumer uncertainty about the overall economy. At issue for thebuilders and potential buyers is tight lending standards and low appraisals for new construction. Couldit be that potential new home buyers are worried about losing the tax deductions for interest on theirmortgage loans? There is not a glut for new homes as the inventory is unchanged at 186,000 units.

Richard SuttmeierChief Market StrategistValuEngine.com, (800) 381-5576

Send your comments and questions to [email protected]. For more information on our products and services visitwww.ValuEngine.com

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I have daily, weekly, monthly, andquarterly newsletters available that track a variety of equity and other data parameters as well as my most up-to-date analysis of world markets. Mynewest products include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. You can go HERE to review sample issues andfind out more about my research.

I Hold No Positions in the Stocks I Cover.

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Dow Industrials Lead, but is it just a Flight to Quality?