Justifying “Dow 8,500 before Dow 11,500”

8/9/2019 Justifying Dow 8,500 before Dow 11,500

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Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,and commentary can be found HERE.

May 4, 2010 Justifying Dow 8,500 before Dow 11,500

Stocks are fundamentally overvalued. The weekly and monthly charts for the Dow IndustrialAverage are overbought. Major technical levels are providing resistances. Stubbornly low USTreasury yields are a flight to quality. The rally in gold tracks the weak euro as currency oflast resort. Weakening copper prices questions the global economic recovery.

Making a Bearish Market Call is not Very PopularMixing fundamental and technical analysis is like trying to mix oil and water.I believe that stock screening of fundamental data and viewing chart patterns are equallyimportant in measuring the risk / reward of the stock market.A stock becomes more fundamentally positive when the price of the stock goes down,and less fundamentally positive as the price goes up.When the price of a stock trends higher the technicals are improving, and when the priceis declining the technicals are deteriorating.

The Bear Market of 2007 - 2009My first warning came prematurely on March 1, 2007 when I called for Recession in 2008 /2009, and that stocks would be in a bear market by the end of 2007.My reasoning was that you cannot have a bull market for stocks with a bear market inHousing and Financials. Today I see a double-dip in housing and there are still problemsin the banking system.In October 2007, I said that the Dow will not sustain gains above 14,000. I said, Beware ofthe Ides of October, as solid gold earnings are factored into Dow 14K.I Predicted that the next 2000 points would be down not up.

The ValuEngine Stock Valuation Model focuses on the following variablesA company's trailing 12-month Earnings-Per-ShareAnalyst consensus estimate of the company's forecasted 12-month EPSThe 30-year Treasury yield.These variables are combined to create a more accurate reflection of a company's FairValue.

Back on March 9, 2009 every sector was extremely undervalued, but at the April 26 th highs alleleven sectors were overvalued. These types of configurations helped me time the major bottom inOctober 2002, the market high in October 2007, and the lows of March 2009.


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Chart Courtesy of Thomson / Reuters


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The monthly chart for the Dow Industrial Average showed me the bottom in March 2009.I looked at the up trend that goes back to the low following the Crash of 1987, and thattrend was being tested.

I drew the Fibonacci Retracement Levels and it was testing the 61.8% retracement of theentire rally from the 1987 low to the October 2007 high and that level was being tested.

The weekly chart for the Dow Industrial Average is showing me the potential market top now.I drew the Fibonacci Retracement Levels between the October 2007 high and the March2009 low and the 61.8% retracement was tested on April 25th.The Dow could not sustain gains above its 200-week simple moving average at 11,134.My annual and semiannual risky levels are 11,235 and 11,442 contained the high of 11,258.My Market Call Has Been: Dow 8,500 Before 11,500.


Low US Treasury yields reflect a flight to quality. Sure supply has been a concern, but when itcomes to bid time buyers are there for the safety of US Treasuries. The yield on the 10-Year traded ashigh as 4.01% on April 5th, and then declined to my semiannual pivot at 3.675 with the 200-day simplemoving average a resistance at 3.586.


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Lower Comex Copper reflects concern about the sustainability of the economic recovery.Copper is trading below its 50-day simple moving average at 343.19 with the 200-day as key support at309.49. My annual resistance at 361.63 was tested at the April 12th high and my annual support is283.51. Why is copper declining when the economy is projected to be this strong?


Thats todays Four in Four. Have a great day.

Richard SuttmeierChief Market Strategistwww.ValuEngine.com(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. Ihave daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters aswell as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as theValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sampleissues of my research.

I Hold No Positions in the Stocks I Cover.

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Justifying “Dow 8,500 before Dow 11,500”