NEW YORK (TheStreet) -- The Dow Industrial Average, S&P 500 and NASDAQ powered to new all time or multi-year highs this week, while the Dow Transportation Average and Russell 2000 did not. All five of the major equity averages began 2013 above their 200-day simple moving averages (SMA) and have stayed above.
This morning I looked back to the beginning of the new millennium and observed that each of the major equity average crossed their 200-day SMAs at least once in every year. Traders and investors must consider this risk as the markets outrun these averages as mojo on weekly charts trump overvalued valuations.
The 200-day SMAs are 13,441 Dow Industrials, 1445.6 S&P 500, 3069 DASDAQ, 5382 Dow Transports and 850.28 Russell 2000.
My measure of momentum is the 12x3x3 weekly slow stochastic, and these readings continue to be extremely overbought at 96.24 Dow Industrials, 94.56 S&P 500, 89.38 NASDAQ, 88.77 Dow Transports and 89.43 Russell 2000. Remember that readings above 80.00 are overbought on a scale of 00.00 t0 100.00.At ww.ValuEngine.com, we show that 61.1% of all stocks are overvalued with 15 of 16 sectors overvalued; ten by double-digit percentages.
My proprietary analytics still show that the major equity averages straddle semiannual value levels, pivots and risky levels. My semiannual value level is 14,323 on Dow Industrials with semiannual pivots at 1566.9 on the S&P 500 and 5955 Dow Transports, and my semiannual risky level at 965.51 Russell 2000. My suggested investment strategy remains the same. Investors should have at least 50% cash on the sidelines, particularly if you doubled your money over the past four years. Continue to avoid the construction and transportation sectors as a "source of funds." In the construction sector we show that 51.9% of all stocks are rated sell or strong sell. In the transportation sector we show that 78.5% of all stocks are rated sell or strong sell. On Monday, I wrote Sequestration Could Ding Q1 Earnings and kicked off earnings season profiling the following stocks: Alcoa ($8.32 vs. $8.24 on April 8) beat EPS estimates by a penny, earning 11 cents a share, but the hold-rated stock could not gain any upside traction.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV