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Earnings, It's All About the Bottom Line

NEW YORK ( TheStreet) -- As the third quarter earnings season began I warned it was important for companies to beat estimates on the revenue line. This awareness came to a head mid-day Thursday and continued into the pre-market on Friday. Here, I profile six stocks who report quarterly results after the close Monday and on Tuesday.

The Dow Industrial Average traded as high as 13,588.73 Thursday morning, then Google (GOOG) inadvertently released its earnings report at 12:30 p.m. with a huge miss in earnings-per-share and on the revenue line.

Then after the close on Thursday Microsoft's (MSFT) also disappointed. Weaker-than-expected earnings reports continued pre-market on Friday with Dow components General Electric (GE) and McDonald's (MCD).

The Dow declined 245 points from the week's high to end the week at 13,343.51, below both its 50-day simple moving average at 13,352.83 and its five-week modified moving average at 13,356.29.

The weekly chart for the Dow shifts to negative with a close this week below the five-week MMA at 13,358.29, only if the 12x3x3 weekly slow stochastic reading declines below 80.00 from the current 83.99.

The downside risk is to the 200-week SMA at 11,008, which held on weakness between August and September 2011. My annual value level is 12,312 with a monthly pivot at 13,506 and weekly, annual and quarterly risky levels at 13,649, 14,032 and 14,192, which are below the October 2007 high at 14,198.10.

Chart Courtesy of Thomson/Reuters

At we show that 56.8% of all stocks are undervalued with 43.2% overvalued with 12 of 16 sectors overvalued. The five most overvalued are; construction by 16.4%, medical by 13.3%, consumer staples by 12.1%, retail-wholesale by 12.1%, utilities by 11.6% and finance by 11.6%.

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Chart of I:DJI
DOW 17,830.76 -210.79 -1.17%
S&P 500 2,075.81 -19.34 -0.92%
NASDAQ 4,805.2910 -57.85 -1.19%

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