Alcoa and 'Too Big to Fail' Banks Key Next Week's Earnings

NEW YORK ( TheStreet) -- Second quarter earnings season begins with Alcoa ( AA) after the close on Monday, putting the focus on the basic materials sector.

On Wednesday we shift to the retail-wholesale sector with earnings from Family Dollar ( FDO) pre-market, and Yum! Brands ( YUM) after the close.

On Thursday and Friday the focus becomes the finance sector with two regional banks on Thursday and two of the four 'too big to fail" money center banks pre-market on Friday.

The fundamental backdrop for the second quarter earnings season is that stocks continue to trade under a ValuEngine valuation warning with 69.1% of all stocks overvalued and with 33.0% overvalued by 20% or more. The basic materials sector is undervalued by 13.4% with the retail-wholesale sector 22.2% overvalued, and the finance sector 18.0% overvalued.

Reading the Table

OV/UN Valued: 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 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: 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: Price at which to enter a GTC limit order to sell on strength.

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