Handicapping Tuesday's Earnings Reports

NEW YORK (TheStreet) -- Tuesday's earnings reports includes five components of the Dow Industrial Average, and gives us a gauge on spending on technology spending, medical consumer products, healthcare maintenance services and soft drinks.

Away from the Dow industrials we have a railroad and an investment banking firm. By the end of Tuesday we will have a better sense of what's happening in several segments of the U.S. and global economies.

Last week the Dow declined 282 points to 13,329 testing and holding its 50-day simple moving average at 13,318.79. There was a technical downgrade on the weekly chart as the Dow ended the week below its five-week modified moving average at 13,356. The shift to neutral becomes a problem over the next week or two if the weekly momentum reading begins to decline out of overbought territory.

The weekly chart shows downside risk to the 200-week simple moving average at 10,984, which held on weakness between August 2011 and September 2011. My annual value level is 12,312 with a monthly pivot at 13,506 and annual and quarterly risky levels at 14,032 and 14,192, which are below the October 2007 high at 14,198.10.

Source: Thomson/Reuters

At www.ValuEngine.com we show that 58.6% of all stocks are undervalued with 41.4% overvalued. While this is a better mix than a week ago, eleven of 16 sectors are overvalued.

The five most overvalued sectors are medical by 13.9%, construction by 12.5%, retail-wholesale by 11.3%, finance by 10.9%, consumer staples by 10.8%, and utilities by 10.3%.

According to Thomson / Reuters earnings season began with only 59% of the S&P 500 beating earnings estimates. If this trend continues third-quarter earnings would be the worst quarter by this statistic since fourth-quarter 2008.

Reading the Table

OV / UN Valued: The stocks with a red number are undervalued by this percentage. 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: Stocks with a red number are projected to decline by that percentage over the next twelve months. Stocks with a black number are projected to move higher by that percentage over the next 12 months.

Value Level: is 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: is the price at which to enter a GTC limit order to sell on strength.

Earnings Reports for Tuesday:

CSX Corp ( CSX) ($21.31): Has a buy rating according to ValuEngine with a reasonable price-to-earnings ratio. CSX is below its 200-day SMA at $21.98. The stock has traded in a 2012 range between $20 and $23.50. The weekly chart is negative with the 200-week SMA at $18.67. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

Goldman Sachs ( GS) ($120.20): Has a hold rating according to ValuEngine with a reasonable P/E and is above its 200-day SMA at $107.91. The stock set its 2012 high at $128.72 on March 27 and set a second half 2012 low at $90.43 on June 26. The weekly chart profile is positive but overbought with the 200-week SMA at $134.34. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

IBM Corp ( IBM) ($207.80): Has a buy rating according to ValuEngine with a reasonable P/E. The stock is above its 200-day SMA at $197.91. IBM set an all time high at $211.79 on Oct. 5. The weekly chart profile is positive but overbought with the 200-week SMA at $149.12. Investors and traders should book profits on strength to my monthly pivot at $208.88 and then employ a "buy-and-trade" strategy between the value level and risky level.

Intel Corp ( INTC) ($21.48): Has a buy rating according to ValuEngine with a favorable P/E. The stock is well below its 200-day SMA at $26.07. Intel declined from a multi-year high at $29.27 on May 3 to a year to date low at 21.40 on Oct 12. The weekly chart is negative but oversold with the stock closing in on its 200-week SMA at $21.14, which is my semiannual value level. Intel has warned on earnings and thus the bar is set much lower. Intel is in my ValuTrader Model Portfolio and subscribers will be adding to this position on a GTC limit order to buy weakness to $21.14.

Johnson & Johnson ( JNJ) ($67.97): Has a buy rating according to ValuEngine with a reasonable P/E and is above its 200-day SMA at $66.08. The stock set a multi-year high at $69.75 on Aug. 1. JNJ turned negative on its weekly chart at Friday's close with the 200-week SMA at $62.12. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

Coca Cola ( KO) ($38.23): Has a buy rating according to ValuEngine with an elevated P/E and is above its 200-day SMA at $37.02. The stock set its 2012 high at $40.66 on July 31 after a 2012 low at $33.28 on Jan. 13. The weekly chart turned negative at Friday's close with the 200-week SMA at $30.33. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

UnitedHealth Group ( UNH) ($57.07): Has a strong buy rating according to ValuEngine with a reasonable P/E and is above its 200-day SMA at $55.19. UNH set a multi-year high at $60.75 on June 19 then a second half 2012 low at $50.32 on Aug. 2. The stock has a positive weekly chart profile with the 200-week SMA is $39.28. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

At the time of publication the author held no positions in any of the stocks mentioned.

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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