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

Downgrades Challenge Dow Theory Buy

NEW YORK ( TheStreet) -- As the Dow Industrial Average and Dow Transportation Average set new all-time highs, nine components in the Dow 30 and four transportation stocks have been downgraded to hold from buy this week. These downgrades are significant and threaten the underpinnings of the stock market and the sustainability of the Dow Theory Buy signal confirmed on Tuesday.

At , we continue to show that stocks are fundamentally overvalued, with 61.6% of all stocks overvalued, 15 of 16 sectors overvalued, and 10 overvalued by double-digit percentages.

These 13 downgrades represent stocks in six overvalued sectors. Aerospace is overvalued by 6.8%; computer & technology by 14.8%; consumer discretionary by 9.2%; finance by 17.1%; oils-energy by 4.3%; and transportation by 19.2%. The finance stock downgraded is one of the four "too big to fail" money center banks.

As the major equity averages move higher, their weekly chart profiles become even more overbought technically. The 12x3x3 weekly slow stochastic readings are 93.16 for Dow Industrials and 94.27 for Dow Transports. (Readings above 80.00 are overbought on a scale of 00.00 to 100.00.)

Dow Theory confirmed a buy this week with Dow Industrials and Dow Transportation setting new all-time closing highs on Wednesday and Tuesday, at 14,296.24 and 6,136.72, respectively. The intraday all-time highs were set on Wednesday at 14,320.6 and 6188.58, versus my semiannual and weekly risky levels at 14,323 and 14,387 Dow Industrials and my weekly risky level at 6192 Dow Transports.

Before this week, 24 of 30 Dow components were rated buy according to ValuEngine, and today this underpinning is down to 15 of 30. In the Transportation Average, the underpinnings are even weaker with only five of 20 stocks rated buy down from nine of 20.
1 of 3

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
BA $134.80 0.00%
CSCO $27.49 0.00%
CSX $27.27 0.00%
CVX $102.18 0.00%
DIS $103.26 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