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NEW YORK ( TheStreet) -- Unless the stock market rallies Friday the major equity averages will end the week below their five-week modified moving averages, and this would be a technical symptom that "QE fatigue" was spreading.
When I look at the weekly charts for the various sector ETFs I also observe negative divergences for basic materials, industrial products and oils-energy. The consumer sectors, finance, medical and computer and technology remain overbought with medical the mojo leader. A problem is that I do not detect a safe haven sector at this time. What this means is that "QE fatigue" could become an epidemic.
On Oct. 10, I wrote
Stocks at Risk on 5th Anniversary of Highs and this week's price action has supported this view.
U.S. Treasury yields remain in trading ranges. Gold remains positive, but stayed below the Aug. 5 year-to-date high at $1,798.10 an ounce this week. Crude oil continued to trade back and forth around my monthly pivot at $91.34. The euro versus the dollar stayed above its 200-day simple moving average at 1.2822.
It's been a month since the
Federal Reserve announced QE3 on Sept. 12, and the major equity averages set 2012 highs on Sept. 14 or Sept. 21. Only the Dow industrials average set a slightly higher high on Oct. 5. The inability to follow-through to the upside is the major cause of "QE fatigue".
Today the major equity averages could simultaneously have weekly closes below their five-week modified moving averages at: 13,362 Dow industrials; 1432.8
S&P 500; 3100
Nasdaq; 5040 Dow transports; 832.19
Russell 2000 and 390.85
SOX. This would shift the weekly chart profiles to neutral or negative depending upon mojo readings.
This morning we show that 53.6% of all stocks are undervalued with 46.4% overvalued. Thirteen of 16 sectors are overvalued led by medical 16.6%, retail-wholesale 13.4%, construction 13.1%, finance 12.9%, consumer staples 12.7% and utilities by 12.6.%.
Third-quarter earnings season continues next week with about a third of the Dow components reporting results. In addition,
Google(GOOG - Get Report) one of the top mojo plays of 2012, reports after the close Thursday. In my opinion the revenue line and forward guidance are the key data to look at, and my reports during the week will provide value levels, pivots and risky levels at which to employ "buy-and-trade" strategies.
Analysis of the Yield on the 10-Year Treasury Note (1.673): My monthly pivot at 1.681% continues as a magnet. The trading around this pivot is between my semiannual value level at 1.853% and my annual risky level at 1.389%.
Analysis of Comex Gold ($1768.8): The weekly chart for gold remains positive and extremely overbought with the five-week modified moving average at $1,727.40. My semiannual, monthly and annual value levels are $1,702.5, $1,643.30, $1,606.00 and $1,575.80 with quarterly risky levels at $1,844.90 and $1,881.40.
Analysis of Nymex Crude Oil ($92.44): The weekly chart for crude oil stays negative on a close Friday below the five-week modified moving average at $92.96. My monthly pivot at $91.34 continues to be a stabilizing force. The 200-week simple moving average is a major support at $81.96 with annual and quarterly risky levels at $103.58 and $107.31.
Analysis of the Euro vs. the Dollar (1.2925): The weekly chart stays positive Friday with a close Friday above the five-week modified moving average at 1.2786. My monthly value level is 1.2589 with my semiannual pivot at 1.2917 and a quarterly pivot at 1.3048.
Analysis of the Dow Industrial Average (13,326): The weekly chart shifts to neutral with a close Friday below the five-week modified moving average at 13,362. My annual value level lags at 12,312 with my monthly pivot at 13,506 and annual and quarterly risky levels at 14,032 and 14,192. The QE3 high is 13,661.87 on Oct. 5.
Analysis of the Dow Transportation Average (5000): The weekly chart for the Dow transports shifts back to negative on a close Friday below its five-week modified moving average at 5040. My monthly value level is 4859 with the Sept. 14 QE3 high at 5231.15.
Analysis of the S&P 500 (1432.8): The weekly chart shifts to neutral on a close Friday below the five-week modified moving average at 1432.8. My annual value level is 1363.2 with monthly and quarterly risky levels at 1468.0 and 1513.3. The Sept. 14 QE3 high is 1474.51.
Analysis of the Nasdaq (3049): The weekly chart shifts to neutral on a close Friday below the five-week modified moving average at 3100. My annual value level lags at 2698 with monthly, annual and quarterly risky levels at 3210, 3232 and 3295. The Sept. 21 QE3 high is 3196.93.
Analysis of the Russell 2000 (829.78): The weekly chart shifts to negative with a close Friday below the five-week modified moving average at 832.19. My monthly pivot is 827.70 with my annual pivot at 836.15 and the Sept. 14 QE3 high at 868.50 and the all time high at 868.57 set on May 2, 2011.
Analysis of the Semiconductor Index or SOX (368.66): The weekly chart stays negative on a close Friday below the five-week modified moving average at 390.85. My semiannual value level is 326.30 with the 200-week simple moving average at 354.43, a monthly risky level at 385.39 and the Sept. 14 high at 410.82.
My bearish diagnosis is materializing as most sectors are overvalued fundamentally, and as negative divergences continue to form on the weekly chart patterns. If the incoming economic data and earnings reports lean to the weaker than expected category, the stock market should forget about "QE hype" and worry about the spreading "QE fatigue" I
At the time of publication the author held no positions in any of the stocks mentioned.Follow @SuttmeierThis article is commentary by an independent contributor, separate from TheStreet's regular news coverage.