This Day On The Street
Continue to site
ADVERTISEMENT
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

Dow, S&P, Nasdaq Are Puffing Up the Bubble

NEW YORK (TheStreet>) -- The stock market has become intensely overvalued fundamentally and the weekly charts for the major averages have become extremely overbought.

A ValuEngine valuation warning occurs when more than 65% of all stocks become overvalued, and this began in mid-May. Today we show that 83.9% of all stocks are overvalued 52.8% by 20% or more. In addition all 16 sectors are overvalued 15 by double-digit percentages. We show that 10 sectors are overvalued by 30.6% to 37%. Sector price-to-earnings ratios are elevated between 18.15 and 31.1. The stock market is thus not cheap by any fundamental metric.

Last week ended with new all-time or multi-year intra-day highs for the major equity averages at 16,174.51 on the Dow Industrial Average (^DJI), 1813.55 on the S&P 500 (SPY), 4069.70 on the Nasdaq (^IXIC), 7273.81 on the Dow Transportation (^DJT) average and 1147.00 on the Russell 2000 (^RUT). Transports began this week extending its all-time intra-day high to 7304.49. The overbought readings for their 12x3x3 weekly slow stochastic are well above the 80.00 threshold between 91.05 and 95.74, but confirming market highs is not immanent.

As I have been saying; 'if you cannot confirm cycle highs, new highs will follow.' My market pulse shows the latest market highs and the upside potential to risky levels and the downside risk to value levels. In my judgment the upside in terms of the Dow Industrials is limited to 3.6% and 5.4% while the downside risk is 20.2%. 

The daily charts for the major equity averages are showing some negative divergences. The Dow Industrial Average shifts to negative with a close below its 21-day simple moving average at 15,889. The S&P 500 shifts to negative on a close below its 21-day SMA at 1785.7. The Nasdaq remains positive but overbought with the 21-day SMA at 3966. The Dow transportation Average shifts to negative with a daily close below its 21-day SMA at 7143. The Russell 2000 remains positive but overbought with its 21-day at 1112.44. 

The weekly charts are not yet showing any negative divergences. The Dow Industrial Average remains positive but overbought with its five-week modified moving average at 15,768. The S&P 500 remains positive but overbought with its five-week MMA at 1770.5. The Nasdaq remains positive but overbought with its five-week MMA at 3947. Dow transports remains positive but overbought with its five-week MMA at 7042. The Russell 2000 remains positive but overbought with its five-week MMA at 1110.32. 

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
Options Profits

Our options trading pros provide over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • Actionable options commentary and news
  • Real-time trading community
SYM TRADE IT LAST %CHG
SPY $191.92 -2.91%
AAPL $107.72 -4.47%
FB $87.23 -2.46%
GOOG $597.79 -3.31%
TSLA $238.63 -4.19%

Markets

Chart of I:DJI
DOW 16,058.35 -469.68 -2.84%
S&P 500 1,913.85 -58.33 -2.96%
NASDAQ 4,636.1050 -140.4030 -2.94%

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs