What to Focus On After the Fed Statement

NEW YORK ( TheStreet) -- The Federal Open Market Committee looks poised to approve additional monetary stimulus when the Federal Reserve releases its statement at 12:30 p.m. EDT Thursday.

The expert consensus calls for the FOMC to extend its zero-to-0.25% federal funds rate into mid-to-late 2015. With regard to a third round of quantitative easing, or QE3, they are predicting it will go forward with aggressiveness ranging from just $400 billion spread over nine months to an open-ended commitment (no amount or end date), beginning with $50 billion this month. The purchases will be long-dated U.S. Treasuries and mortgage-backed securities.

As my readers know, I am against what the Federal Reserve has done and think that Ben Bernanke needs to be replaced.

Following the Fed statement, I recommend focusing on Comex gold and Nymex crude oil. I covered gold on Monday in Gold Stocks Continue to Lag Gold and crude oil on Tuesday in Energy Stocks Outperforming Crude Oil. In the currency markets, focus on the euro vs. the dollar, where a technical breakout is close above my semiannual pivot at 1.2917, which was tested this morning.

Among the major equity averages, my focus is the Dow Jones Transportation Average, which has been a lagging, but playing catch-up this week. If the stock market reacts positively to the Fed statement, Transports should continue to recover, as they are the most economically sensitive.

Transports ended last week with a negative weekly chart profile, while all other major averages were solidly positive. If Transports ends this week above its five-week modified moving average at 5094, the weekly chart profile shifts to positive.

Dow Transports are important for the long-term bulls because the Dow Jones Industrial Average had a new 2012 closing high at 13,333.35 on Wednesday. In tracking Dow theory, the Dow Transports needs to have a closing high above its March 19 high at 5360.04 to confirm a Dow Theory Buy Signal.

Source: Thomson/Reuters

Analysis of the Dow Jones Transportation Average (5174) -- The daily chart for Transports is positive with rising momentum and is above its 21-day, 50-day and 200-day simple moving averages at 5097, 5096 and 5128. My weekly value level is 4989 with my monthly risky level at 5279.

Today I am profiling seven stocks in the Dow Jones Transportation Average that are buy rated, according to www.ValuEngine.com: one trucker, two shippers (Air Freight) and four railroads.

Reading the Table

OV/UN Valued -- The stocks with a red number are undervalued by the percentage shown. Those with a black number are overvalued by that percentage, according to ValuEngine.

VE Rating -- A "1-Engine" rating is a strong sell, a "2-Engine" rating is a sell, a "3-Engine" rating is a hold, a "4-Engine" rating is a buy and a "5-Engine" rating is a strong buy.

Last 12-Month Return (%) -- Stocks with a red number declined by that percentage over the last 12 months. Stocks with a black number increased by that percentage.

Forecast 1-Year Return (%) -- All stocks with a red number are projected to decline by that percentage over the next 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next 12 months.

Value Level: The price at which to enter a GTC Limit Order to buy on weakness. The letters mean: W-Weekly, M-Monthly, Q-Quarterly, S-Semiannual and A- Annual.

Pivot: A level between a value level and risky level that should be a magnet during the time frame noted.

Risky Level: The price at which to enter a GTC Limit Order to sell on strength.

CSX ( CSX) ($22.84) has a buy rating and a reasonable P/E ratio, and is above its 200-day SMA at $21.92 with my monthly risky level within reach at $23.05.

FedEx ( FDX) ($89.08) has a buy rating and a reasonable P/E ratio, and is just above its 200-day SMA at $89.02.

JB Hunt Trans ( JBHT) ($52.98) has a buy rating and an elevated P/E ratio, and is just above its 200-day SMA at $52.83.

Kansas City Southern ( KSU) ($81.76) has a buy rating but is 14.7% overvalued with an elevated P/E ratio and well above its 200-day SMA at $70.68. KSU set a new all-time high on Wednesday, moving above my quarterly pivot at $80.95 with no risky level.

Norfolk Southern ( NSC) ($74.02) has a buy rating and a reasonable P/E ratio, and is well above its 200-day SMA at $70.98.

Union Pacific ( UNP) ($124.94) has a strong buy rating and an in-line P/E ratio, and is well above its 200-day SMA at $112.76. UNP is approaching my monthly risky level at $125.32.

United Parcel Service ( UPS) ($73.64) has a strong buy rating and an in-line P/E ratio, and is well below its 200-day SMA at $76.21.

In sum, the rails are on the fast track, trading above their 200-day simple moving averages. JB Hunt, the only buy rated trucker, is just above its 200-day, so look for a move into the passing lane on a positive reaction to the Fed statement. FedEx and UPS have issued earnings warnings recently. FedEx is just above of its 200-day, while UPS lags its 200-day. UPS should have upside potential on a positive market reaction to the FOMC.

This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.

Richard Suttmeier has an engineering degree from Georgia Tech and a master of science from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. In 1981 he formed the Government Bond Department at LF Rothschild and helped establish that firm as a primary dealer in 1986. Richard began writing market research in 1984 and held positions as market strategist at firms such as Smith Barney, William R Hough, Joseph Stevens, and Rightside Advisors. He joined www.ValuEngine.com in 2008 producing newsletters covering the U.S. capital markets, and a universe of more than 7,000 stocks. Richard employs a "buy and trade" investment strategy and can be reached at RSuttmeier@Gmail.com.

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