Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.

ValuEngine is a fundamentally-based quant research firm in Newtown, PA. ValuEngine

covers 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

January 17 / 18, 2011 – Trading Under a ValuEngine Valuation Warning

Stocks are trading higher on pure technical momentum, not because of cheap fundamentals. Both
daily and weekly charts for the major equity averages are overbought when observing their 12x3x3
Slow Stochastic Readings, which are 8.0 on the daily Dow chart and 9.3 on the weekly Dow chart. A
Slow Stochastic is on a scale of zero to ten where two and under is oversold and eight an above is
overbought. It seems that Wall Street has convinced investors on Main Street to sell US Treasuries
and other fixed income to buy US equities. This strategy does not make any sense with the Dow
82.2% above its March 2009 lows, when ValuEngine showed stocks the cheapest I have ever seen. It
is rare when all sixteen sectors are overvalued and when less than 35% of all stocks are undervalued;
as they are today we have what’s called – A ValuEngine Valuation Warning.
Since December 16th the yield on the 10-Year US Treasury yield has actually declined from 3.568 to
3.247, which is a tradable range with this week’s value level at 3.609 and with the five-week modified
moving average at 3.184.
Complacency in the stock market has caused the parabolic bubble in Comex gold to pop with the
precious metal trending below its 50-day simple moving average for the first time since last August. So
far in the New Year gold has tested and held my annual value level at $1356.5 with lower semiannual
value level at $1300.6. This week’s risky level is $1409.7.
Speculation in commodities had Nymex crude oil above $92 three days so far in January, but without
a close above, after a successful test of my semiannual value level at $87.52. I don’t disagree with the
Wall Street call for oil to reach $100 per barrel as my annual risky levels are $99.91 and $101.92. Oil
could trade to semiannual and quarterly risky levels at $107.14 and $110.87, but significantly higher oil
is not in the cards. Gasoline above $3 per gallon has slowed demand on Main Street and any
additional gains will slow the economy even more.
The euro versus the dollar has been as low as 1.2878 and as high as 1.3497, but I suspect reversal-
oriented trading around my quarterly pivot at 1.3227.
Stocks can trade higher on the HYPE of Wall Street. This week’s risky levels are 11,858 Dow, 1304.9
SPX, 2802 NASDAQ, 5331 Transports and 835.88 on Russell 2000. The NASDAQ has a quarterly
risky level at 2853. This week we get earnings from Apple Inc after the close Tuesday and Google on
Thursday. ValuEngine’s one-year price targets are $357.89 and $658.36. On Monday Steve Jobs
announced he would be on medical leave again and the stock traded 7% lower in Europe.
The AAII Central Florida Chapter Presents
“The Death of Buy and Hold, the Rise of Buy and Trade” by Richard Suttmeier
Wednesday, January 19, 2011
6:30 - 7:00 p.m. Registration / Refreshments
7:00 p.m. Presentation
8:00 – 8:30 p.m. Q&A
University Club of Winter Park
841 N. Park Ave
Winter Park, FL 32789
Contact Information – aaiichapter_centralflorida@yahoo.com
That’s today’s Four in Four. Have a great day.
Richard Suttmeier
Chief Market Strategist
ValuEngine.com, (800) 381-5576
Send your comments and questions to Rsuttmeier@Gmail.com. For more information on our products and services visit
www.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, and
quarterly newsletters available that track a variety of equity and other data parameters as well as my most up-to-date analysis of world markets. My
newest products include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. You can go HERE to review sample issues and
find out more about my research.

“I Hold No Positions in the Stocks I Cover.”