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Earnings From These Seven Stocks Should Set the Market's Tone

NEW YORK (TheStreet) -- This week brings earnings reports from seven important stocks.

The market's reaction to these earnings reports should set the stage for market performance for at least the remainder of the fourth-quarter earnings season.

(Note that many major banks also are reporting earnings. You can read my profiles of them in "Buy-Rated Big-Bank Stocks to Trade Pre-Earnings.")

At www.ValuEngine.com we continue to show that all 16 market sectors are overvalued. The stocks I'm previewing today are in the following sectors: construction, which is overvalued by 20.1%; finance, overvalued by 13.0%; medical, overvalued by 12.2%; computer & technology, overvalued by 12.4%; oils-energy, overvalued by 3.3%; and multisector conglomerates, overvalued by 4.3%.

Two of the seven stocks profiled today are overvalued, one by 20.5% and another by a whopping 53.1%. Five have buy ratings, and two have hold ratings.


One is down 11.8% over the past 12 months, while four had double-digit gains ranging from 15.8% to 85.1% during that period. The upside for these stocks over the next 12 months ranges from 4.3% to 11.3%.

One of the seven has an elevated 12-month trailing price-to-earnings ratio of 36.8. Five of seven are trading above their 200-day simple moving averages (SMA), which reflects the downside risk of a reversion to the mean.

Here are my "buy and trade" profiles for this week's earnings stocks:

Reporting before the open on Tuesday is Lennar (LEN) ($40.95). It's expected to earn 43 cents per share. Lennar set a multiyear high at $42.00 on Jan. 9, which raises the bar given the 53.1% overvalued reading and 36.8 P/E ratio. The daily chart shows an overbought condition and the weekly chart is positive with the five-week modified moving average (MMA) at $38.58. My semiannual value level lags at $36.03 with a monthly pivot at $40.58 and a weekly risky level at $41.41.

Reporting before the open on Wednesday is Goldman Sachs (GS) ($137.13). It's expected to earn $3.37 per share, raised from $3.21 a week ago. Goldman set a new 52-week high at $138.15 on Jan 10. The daily chart is extremely overbought, and the stock is 20.5% overvalued. The weekly chart is positive with the five-week MMA at $126.47 and the stock just above its 200-week SMA at $136.83. My monthly value level lags at $108.66 with a weekly pivot at $136.77 and a semiannual risky level at $180.10, which is where the stock traded back on April 17, 2012.

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