This Day On The Street
Continue to site
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

Overvalued and Overbought Conditions Limit Upside

NEW YORK ( TheStreet) -- Stocks began 2013 with a strong rally and as a result have become overvalued fundamentally and overbought technically. We enter February with new monthly value levels, pivots and risky levels that should limit the upside potential for the stock market. With the yield on the 30-year bond trading around 3.20%, stocks have become less undervalued and more overvalued.

Some recent economic data have been weaker than expected such as: The Conference Board's reading on Consumer Confidence at 58.6 well below the 90 to 110 neutral readings, Advanced GDP for Q4, with a contraction of 0.1% when a modest expansion was expected, and Initial Jobless Claims back above the recessionary threshold of 350,000 with the four-week moving average still above 350,000 at 352,000.

It's all about valuations, technicals and levels, and it appears that the Dow Industrial Average and the S&P 500 will not see new all-time highs versus their October 2007 highs at 14,198.10 and 1576.09 respectively.

At we show that 63% of all stocks are overvalued up from 59.5% a week ago. When 65% or more are overvalued ValuEngine issues a valuation warning. This is the fundamental reason the Dow Industrials and S&P 500 will not set new all time highs during this rally.

Technically the monthly charts are overbought for Dow Industrials, S&P 500 and the Russell 2000, not for the Nasdaq or Dow Transports.

The weekly charts are overbought for the S&P 500, Dow Transports and Russell 2000 with Dow Industrials and the Nasdaq a week away from being overbought.

With all weekly charts becoming overbought next week the technicals suggest limited additional upside for the stock market at least for February.

Levels from my proprietary analytics suggest limited upside in February: New monthly risky levels are 14,132 on the Dow Industrials and 1542.9 on the S&P 500, both below their respective October 2007 highs.

Other new monthly risky levels are 3250 for the Nasdaq and 911.32 on the Russell 2000, which is just above the all-time high at 907.91 set on January 25. My quarterly pivots are 13,668 Dow Industrials, 1431.1 S&P 500 and 3071 Nasdaq. My annual pivot and monthly value level are 5469 and 5440 on Dow Transports. My annual pivot is 860.25 on the Russell 2000.
1 of 2

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

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
Stocks Under $10

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

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
Dividend Stock Advisor

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
  • Updates with exact steps to take - BUY, HOLD, SELL
Trifecta Stocks

Every recommendation goes through 3 layers of intense scrutiny—quantitative, fundamental and technical analysis—to maximize profit potential and minimize risk.

Product Features:
  • Model Portfolio
  • Intra Day Trade alerts
  • Access to Quant Ratings
Real Money

More than 30 investing pros with skin in the game give you actionable insight and investment ideas.

Product Features:
  • Access to Jim Cramer's daily blog
  • Intraday commentary and news
  • Real-time trading forums
Only $49.95
14-Days Free
14-Days Free
AAPL $93.74 0.00%
FB $117.58 0.00%
GOOG $693.01 0.00%
TSLA $240.76 0.00%
YHOO $36.60 0.00%


Chart of I:DJI
DOW 17,773.64 -57.12 -0.32%
S&P 500 2,065.30 -10.51 -0.51%
NASDAQ 4,775.3580 -29.9330 -0.62%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs