8/9/2019 The Second Quarter begins with Stocks Overvalued and Overbought

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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.

Apri l 1, 2010 The Second Quart er begins w i t h Stoc ks Overvalued and Overbought

Higher US Treasury yields will put a drag on equity valuations. The zero percent funds rate willrefuel commodity speculation re-inflating bubbles for gold and crude oil. The euro is still wellabove its 120-month simple moving average. Ten of eleven sectors are overvalued according toValuEngine, as monthly charts become overbought for the major equity averages, and asresistances loom.

The yield on the 10-Year US Treasury shows risk of rising to 4.250 with the 120-month simplemoving average at 4.331. With the Federal Reserve no longer buying GSE mortgages and debt,mortgage rates should start to rise again. The spread between the 10-Year and mortgage rates havedeclined to between 100 and 125 basis points, which should keep mortgages stable for now, butrefinancings will become more difficult to justify. Remember that a higher 30-Year bond yield is a directdrag on equity valuations making stocks less undervalued and more overvalued.

Courtesy of Thomson / Reuters

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Whenever the Fed keeps the Federal Funds Rate below 3% commodity speculation becomes aproblem, which eventually creates bubbles, which kills economic growth. Gold and crude oil wellabove 120-month simple moving averages is a sign of bubbles reforming.

Comex Gold shows a new quarterly support at $1052.8 with my annual pivot at $1115.2 andsemiannual and monthly resistances at $1186.5 and $1202.5, so the trading range continues.

Courtesy of Thomson / Reuters

Nymex Crude Oil shows a new monthly pivot at $84.54, which was tested as the second quarterbegins. My annual support is $77.05 with annual resistance at $97.29.

Courtesy of Thomson / Reuters

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The euro remains well above its 120-month simple moving average after an extremely weak firstquarter. My new quarterly support is 1.2450 with monthly resistance at 1.4081.

Courtesy of Thomson / Reuters

Stocks are overvalued according to ValuEngine. It is tough to pick stocks to buy when 43.7% areundervalued and 56.3% are overvalued. Ten of eleven sectors are overvalued. Only Technology is

undervalued, but by only 1%. 12-month and year to date gains are great, but sustaining them getsmore difficult with these overvalued readings and extended P/E ratios.

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The Dow has broken out above its 120-month simple moving average, but now the S&P 500, asboth become overbought on their monthly chart. 2010 has the look and feel of 2007.

The Dow has become overbought on its monthly chart with the 120-month simple moving average assupport at 10,460. My annual pivot is 10,379 with monthly, annual and semiannual resistances at11,228, 11,235 and 11,442. Quarterly support lags at 7,490.

Courtesy of Thomson / Reuters

The S&P 500 ended the first quarter overbought on its monthly chart and just below its 120-monthsimple moving average at 1178.79, which lines up with my annual pivot at 1179. I show tightsemiannual and monthly resistances at 1194.6 and 1199.6 with semiannual resistance at 1281.1. Myquarterly support lags at 805.4.

Chart Courtesy of Thomson / Reuters

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Thats todays Four in Four. Have a great day.

Richard Suttmeier

Chief 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.