Handicapping Key Earnings Reports

NEW YORK ( TheStreet): On Wednesday we learn about the demand for soft drinks, chips & dip and the status of the use of credit cards. On Thursday the focus is Internet advertising, property and casualty insurance, another read on investment banking, the demand for windows software and the FIOS Internet Platform. On Friday it's the demand for a Big Mac and diversified industrial goods and services.

On Monday I profiled the stocks that report their earnings in Handicapping Tuesday's Earnings Reports. Tuesday's report covers the key earnings for the remainder of the week.

The main focus is to determine whether or not corporate America is performing well enough to beat earnings-per-share estimates and beat on the revenue line, and do so without the need to lower forward guidance.

On Monday I showed the deterioration of the technicals for Dow Jones Industrial Average, so today I will present the technicals for the S&P 500. The weekly chart for the S&P 500 ended last week below its five-week modified moving average at 1432.0.

Weekly momentum remains overbought so the weekly chart profile is neutral. If the S&P 500 continues to slide the weekly chart will become negative in a week or two. The 200-week simple moving average is at major support at 1170.6, last tested between August and October last year.

Chart Courtesy of Thomson/Reuters

The daily chart for the S&P 500 shows a double top versus the highs at 1474.51 on Sept. 14 and 1470.96 on Oct. 5. SPX is below its 21-day simple moving average at 1448.4 and tested its 50-day at 1429.2 on both Friday and Monday. If we have a daily close below the 50-day the risk is to the 200-day at 1370.3. Strength into Oct. 5 was a failed test of my monthly pivot at 1468.0. My annual pivot lags at 1363.2 with this week's risky level at 1457.5. My quarterly and annual risky levels at 1513.3 and 1562.9 are below the October 2007 high at 1576.09.

This morning, www.ValuEngine.com shows that 57.2% of all stocks are undervalued with 42.8% overvalued. We show 11 of 16 sectors are overvalued. The six most overvalued sectors are; medical by 14.3%, construction by 13.3%, retail-wholesale by 11.8%, consumer staples by 11.7%, finance by 11.4%, and utilities by 10.7%.

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 twelve 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 12 months. Stocks with a black number in the table are projected to move higher by that percentage over the next twelve 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.

Earnings Reports for Wednesday:

Pepsico ( PEP) ($70.34): Has a buy rating according to ValuEngine with a slightly elevated P/E. PEP is above its 200-day SMA at $68.03. The stock reached a multi-year high at $73.66 on Aug. 27. The weekly chart is negative with the 200-week SMA at $62.97. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

American Express ( AXP) ($57.59): Has a buy rating according to ValuEngine with a reasonable P/E and is above its 200-day SMA at $55.83. The stock set its 2012 high at $61.42 on May 2 and a 2012 low at $53.18 on June 1. The weekly chart profile shifts to negative on a close this week below its five-week modified moving average at $57.80. The 200-week SMA is $42.21. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

Earnings Reports for Thursday:

Google Inc ( GOOG) ($740.98): Has been upgraded to buy from hold this morning according to ValuEngine. The stock has an elevated P/E and is well above its 200-day SMA at $630.83. Google set an all-time-high at $774.38 on Oct. 5 and then was downgraded to hold from buy. The weekly chart profile is positive but overbought with the 200-week SMA at $538.51. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

Travelers Companies ( TRV) ($69.79): Has a buy rating according to ValuEngine with a reasonable P/E. The stock is above its 200-day SMA at $62.34. TRV set a multi-year high at $70.00 on Oct 4. The weekly chart profile is positive but overbought with the 200-week SMA at $53.34. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

Morgan Stanley ( MS) ($17.31): Has a hold rating according to ValuEngine with a slightly elevated P/E. The stock is above its 200-day SMA at $16.35. MS set its 2012 high at $21.19 on March 26 then had its 2012 low at $12.66 on June 4. The weekly chart is positive but overbought with the 200-week SMA at $23.37. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

Microsoft Corp ( MSFT) ($29.51): Has a buy rating according to ValuEngine with a favorable P/E and is below its 200-day SMA at $30.34. The stock set its 2012 high at $32.95 on March 16 and 2012 low at $28.32 on June 4. The weekly chart is negative with the 200-week SMA at $26.36. Investors and traders should book profits on strength to my annual pivot at $29.58 then employ a "buy-and-trade" strategy between the value level and risky level.

Verizon Communications ( VZ) ($44.50): Has a hold rating according to ValuEngine with a slightly elevated P/E and is above its 200-day SMA at $41.52. The stock set a multi-year high at $48.77 on Oct. 1. The weekly chart turned negative at Friday's close with the 200-week SMA at $33.65. Investors and traders should employ a "buy-and-trade" strategy between the value level and risky level.

Earnings Reports for Friday:

McDonalds ( MCD) ($93.50): Has a buy rating according to ValuEngine with a slightly elevated P/E and is approaching its 200-day SMA at $93.82 on the upside. The stock set its 2012 high at $102.22 on Jan. 20 and its 2012 low at $85.92 on June 8. The stock has a positive weekly chart profile with the 200-week SMA is $75.59. Investors and traders should book profits on strength to my annual pivot at $94.05 then employ a "buy-and-trade" strategy between the value level and risky level.

General Electric ( GE) ($22.64): Has a buy rating according to ValuEngine with a reasonable P/E and is above its 200-day SMA at $19.95. The stock set a multi-year high at $23.18 on Oct. 5. The stock has a positive but overbought weekly chart profile with the 200-week SMA at $16.86. 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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