This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Homebuilders' Downgrades Continue

NEW YORK (TheStreet) -- The major equity averages continued to set new all time highs this week, with the Nasdaq setting a new multi-year high. Stock market strength is causing higher overbought technical momentum readings on weekly charts.

Higher stock prices and a higher 30-year Treasury bond yield intensified the ValuEngine valuation warning as 70.8% of all stocks were overvalued on Wednesday. This morning this reading slipped to 69.9% as the bond yield moved slightly lower. The bottom line is that stocks are more overvalued and more overbought than they were a week ago, but still without confirming a market top.

This continued market dynamic is similar to 1999/2000 when there were worries about how the clocks around the world would tick going into the first day of the new. Tech spending to prevent problems and an easy monetary policy by the Federal Reserve was fueling a parabolic bubble in the tech heavy Nasdaq. When the Nasdaq moved above 5000 in March 2000 I told investors to reduce holdings in Nasdaq stocks by 50% saying that the Nasdaq would decline to 3500 then 3000 before the end of the year.

Today the Nasdaq is back within the 3000 to 3500 cone of the March 2000 tech bubble, and this time it's the easy money policy of the Federal Reserve via QE3 and QE4. The upside for the Nasdaq is to my semiannual risky level at 3583, only 3.4% higher than Thursday's close. This week, some Fed officials suggested that this policy should be unwound.

This week's data included weaker than expected regional manufacturing. Industrial production was below expectations. On Thursday jobless claims were back above the 350,000 recessionary threshold, and housing starts were much weaker than expected. This suggests that the QEs are not working.

Here are some stock specific concerns as the equities bubbles inflate:

When Google (GOOG) ($903.87) popped above $900 on Wednesday and traded as high as $919.97 on Thursday pushing the stock above ValuEngine's one-year price target at $912.09. In my opinion additional strength is merely inflating a stock specific bubble. Google is 9.3% overvalued and my semiannual pivot is $854.04.


When Apple (AAPL) traded above $700 back on Sept. 21, it too traded slightly above the ValuEngine one-year price target and was downgraded to hold from buy. If you are trading Google consider using a stop loss to minimize a loss or lock in a gain.

1 of 3

Select the service that is right for you!

COMPARE ALL SERVICES
Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
DOW 16,551.61 -11.69 -0.07%
S&P 500 1,933.17 +2.50 0.13%
NASDAQ 4,370.3030 +0.53 0.01%

Brokerage Partners

Rates from Bankrate.com

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs