Major Equity Averages Testing Risky Levels

NEW YORK (TheStreet) -- A risky asset class just got riskier as stock market fundamentals remain overvalued and as the technicals become more overbought. This week the Dow Industrial Average joined the Dow Transportation Average setting new all-time highs, and in the process confirmed a Dow Theory Buy.

This week my writings focused on reasons to be cautious and included exit strategies in addition to my "buy and trade" strategies.

On Monday, I wrote Apple Joins Others Behind the Woodshed , giving "buy and trade" strategies for nine stocks that traded lower for company-specific reasons. Five of these stocks have buy ratings, and value levels at which to buy on weakness. It's not easy picking buy-rated stocks after they are taken to the woodshed.

On Tuesday, I wrote Multi-Year Lows Tarnish Gold Stocks, where I profiled eight gold miners that have became extremely undervalued. Weakness in these stocks became more severe than the commodity they dig for. In my judgment investors should include at least one of the buy or strong-buy rated stocks in their investment portfolios.

On Wednesday, I wrote Apple Buy, Google Hold, Amazon Sell, explaining the diverse profiles for these three popular investing and trading vehicles. Apple (AAPL) has become a value trade and bounced off its annual value level, now an annual pivot at $421.05. Amazon.com (AMZN) has a sell rating and failed within its $275.15 to $277.07 monthly pivot and weekly risky level. Google (GOOG) is the new king of MOJO and the stock opened this day trading to a new all time high at $844.00 which was just above the ValuEngine one-year price target then at $841.81.

My Thursday post, Downgrades Challenge Dow Theory Buy, warned about nine downgrades in Dow Industrials and four downgrades in Dow Transports (to hold from buy) could hurt the underpinnings of the confirmed Dow Theory Buy.

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This morning, www.ValuEngine.com issues a valuation watch as 63.3% of all stocks are overvalued. A valuation warning comes when 65% or more of all stocks are overvalued. We have had market hiccups following two warnings already this year. We still show 15 of 16 sectors overvalued, 11 by double digit percentages. The three most overvalued sectors are transportation (by 20.9%), construction (by 22.0%), and consumer staples (by 22.5%).

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