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Book Profits in Overvalued Market

Stocks in this article: DHI GS LOW MAS MHK MLI PHM RYL TXI

Other monthly and semiannual risky levels are 1542.9 and 1566.9 S&P 500, and 3250 and 3583 Nasdaq.

Annual and semiannual risky levels are 5925 and 5955 Dow transports.

My monthly pivot and semiannual risk level are 911.32 and 965.51 on the Russell 2000.

The downside during the first quarter is to my quarterly pivots at 13,668 Dow industrials, 1431.1 S&P 500 and 3071 Nasdaq. Other downside targets are my annual pivot at 5469 on Dow transports, and my annual pivot at 860.25 on the Russell 2000.

Sometime during the year the downside risk is to my annual value levels at 12,696 Dow industrials, 1348.3 S&P 500, 2806 Nasdaq and 809.54 Russell 2000.

The most overvalued stocks I have been profiling are in or related to the construction sector. All of these stocks are above their 200-day simple moving averages, which is a warning of a reversion to the mean.

D R Horton (DHI) ($23.35) beat earnings estimates last week and traded to a new multi-year high at $24.29 Friday. DHI began the year with a buy rating and now has a hold rating with the stock 42.0% overvalued. My semiannual value level is $20.50 with a weekly pivot at $23.23 and monthly risky level at $24.10.

Goldman Sachs (GS) ($149.90) has underwritten many mortgage-related securities so the company has ties to the construction sector. GS has a hold rating with the stock 33.1% overvalued and traded to a new multi-year high at $150.39 on Friday. My monthly value level is $144.22 with a weekly risky level at $157.58.

Lennar (LEN) ($41.07) does not report quarterly results until March 26 and traded to a new multi-year high at $43.22 on Jan. 28. LEN began the year with a buy rating and is still buy rated, but is 56.3% overvalued. My semiannual value level is $36.03 with a weekly risky level at $43.72.

Lowe's (LOW) ($38.56) does not report quarterly results until Feb. 25, and the stock traded to a multi-year high at $39.26 on Jan. 25. LOW has a buy rating and is 32.0% overvalued. My quarterly value level is $31.71 with a monthly pivot at $38.37 and no risky levels.

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