Hewlett-Packard, Lowe's, Target Earnings on Deck

NEW YORK (TheStreet) -- Today I preview nine companies that report quarterly results on Wednesday. Six are buy-rated retail-wholesale stocks, one is a buy-rated stock in the computer and technology sector, another is a hold-rated stock in the consumer staples sector and one is a hold-rated homebuilder in the construction sector.

The fundamental backdrop for the stock market remains difficult as the ValuEngine valuation warning continues with 75% of all stocks overvalued, 42% by 20% or more. The retail-wholesale sector is 23.9% overvalued with the computer and technology sector 22% overvalued, the consumer staples sector 17.7% overvalued, and the construction sector 16.5% overvalued.

The technical backdrop is deteriorating. Dow industrials and Dow transports have negative weekly chart profiles, and the S&P 500 is lined up to follow this week. The downside is to quarterly and annual value levels at 14,288 / 12,696 Dow industrials, 1525.6 / 1348.3 S&P 500, 3284 / 2806 Nasdaq, 5348 / 5469 Dow transports, and 863.05 / 860.25 / 809.54 Russell 2000. Weekly closes below the five-week modified moving average are 15,306 Dow industrials, 1666.8 S&P 500, 3573 Nasdaq, 6426 Dow transports and 1026.03 Russell 2000 with the 12x3x3 weekly slow stochastic readings declining below 80.00 across all five major averages will confirm the early August highs as cycle highs.

Seven of the nine stocks are overvalued, two by more than 25%. One stock is down more than 20% over the last 12 months, while four gained more than 25%. Two are trading below their 200-day simple moving averages, while seven show risk of a reversion to the mean by being above their 200-day SMAs.

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.

American Eagle Outfitters ( AEO) ($16.00) traded to a new 52-week low at $15.97 on Monday. I do not have a value level. My monthly pivot is $18.11 and semiannual risky level at $18.75.

Hewlett-Packard ( HPQ) ($25.88) set a multi-year high at $27.77 on Aug. 2. My semiannual value level is $24.24 with a weekly pivot at $27.92 and semiannual risky level $29.68. The stock is just above its 50-day SMA at $25.66.

Lowe's ( LOW) ($43.67) set a multi-year high at $46.25 on Aug. 8. My quarterly value level is $24.24 with a monthly pivot at $43.99 and weekly risky level at $48.08. The stock is just above its 50-day SMA at $43.12.

L Brands ( LTD) ($59.04) set a multi-year high at $61.36 on Aug. 13. My semiannual value level is $56.99 with a weekly pivot at $58.43 and semiannual risky level at $63.35.

PetSmart ( PETM) ($74.42) set a multi-year high at $75 on Aug. 5. My monthly value level is $64.91 with a semiannual pivot at $74.51 and weekly risky level at $76.07.

JM Smucker ( SJM) ($109.06) set a multi-year high at $114.72 on Aug. 6. My semiannual value level is $102.37 with a semiannual pivot at $109.18 and monthly risky level at $111.92. The 50-day SMA is a key support at $107.05.

Staples ( SPLS) ($16.41) set a multi-year high at $17.29 on Aug. 13. My semiannual value level is $13.66 with an annual pivot at $16.58 and monthly risky level at $17.10. The stock is just above its 50-day SMA at $16.39.

Target ( TGT) ($68.24) set a multi-year high at $73.50 on July 24. My annual value level is $65.45 with a monthly pivot at $70.74 and semiannual risky level at $72.47. The stock is below its 50-day SMA at $70.69.

Toll Brothers ( TOL) ($30.66) set a multi-year high at $39.25 on May 22 then traded down to $30.15 on August 15. The 2013 low at $30.15 was set on Aug. 15. My semiannual value level is $24.57 with an annual pivot at $31.95 and weekly risky level at $33.54.

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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