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Our Less-Than-Robust Bull Market Since May

Stocks in this article: CSCO GE HD IBM KO MCD MMM PG T UTX VZ WMT

NEW YORK ( TheStreet) -- When you cannot confirm market highs new highs will follow. This happened at the May highs, then at the August highs and now following the September highs. However, the bull market extension since May has not been as robust as Wall Street and the media have been touting.

The Market Pulse above shows the performances of the indices I follow including the five major equity averages. Since the May highs the Dow Jones Industrial Average is down 1.4% despite setting a new all-time high at 15,709.59 on Sept. 18. Both the S&P 500 and Dow transports are higher by just 0.7% and 1.1% respectively. The winners since the May highs are the tech-heavy Nasdaq and the small cap Russell 2000 up 7.2% and 7.0% respectively. In the table, I also show the upside to semiannual risky levels and the downside to the annual value levels.

Fundamentally the stock market has been trading under a ValuEngine valuation warning since those May highs. Today 77.4% of all stocks are overvalued 44.2% by 20% or more. A total of 15 out of 16 sectors are overvalued; 13 by double-digit percentages; 10 by more than 20%.

The Nasdaq remains influenced by my semiannual pivot at 3759 after setting a multi-year high at 3798.76 on Sept. 20. The all time highs are 15,709.59 Dow Industrials set on Sept. 18, 1729.86 S&P 500 on Sept. 19, 6754.81 Dow transports on Sept. 20 and 1082.00 Russell 2000 on Sept. 25.

If the Nasdaq ends the week above 3759 the upside potential elsewhere is to semiannual risky levels at 16,490 Dow Industrials, 1743.5 S&P 500, 7104 Dow transports and 1089.42 Russell 2000.

Given a weekly close below 3759 on the Nasdaq, stocks become vulnerable towards annual value levels at 12,696 Dow Industrials, 1348.3 S&P 500, 2806 Nasdaq, 5469 Dow transports, and 809.54 Russell 2000. Next Tuesday we will have new monthly and quarterly levels, which could temper this downside risk.

Today's table profiles the 12 Dow components that have buy ratings according to www.ValuEngine.com:

Only one of the 12 buy-rated Dow components is undervalued, but only three are overvalued by more than 20%. Two are down over the last 12 months, but only four are higher by 28% to 39.6%. Four are trading below their 200-day simple moving averages and the others are above their 200-day simple moving averages.

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