Key Earnings This Week: Aluminum, Discount Retailers and Restaurants

NEW YORK (TheStreet) -- Third-quarter earnings season becomes a major focus this week, and on Tuesday and Wednesday six important companies report results.

One is Alcoa ( AA), a former Dow Jones Industrial Average component that traditionally kicked off earnings season.

But the five other companies I'm highlighting, in the retail-wholesale sector, are more important to watch this earnings season, because they will provide important information about consumer spending. Consumer confidence has slumped recently.

The basic materials sector is 5.1% undervalued and has an underweight rating with 64.9% of the 401 stocks in this sector rated sell or strong sell.

The retail-wholesale sector is 23.4% overvalued but has an overweight rating with 79.4% of the 354 stocks in the sector rated buy or strong buy.

Last week was a strange one for the major equity indices. The Dow Jones Industrial Average lost 185 points while the Nasdaq tacked on 26 points. The S&P 500 was down fractionally while the Dow transports and Russell 2000 were up fractionally. This week's value levels are 14,809 for the Dow Jones industrials, 1658.8 for the S&P 500, 3763 for the Nasdaq, 6522 for the Dow transports and 1053.22 for the Russell 2000.

The Nasdaq ended last week above my semiannual pivot at 3759 with the semiannual risky levels at 16,490 for the Dow industrials, 1743.5 for the S&P 500, 7104 for the Dow transports and 1089.42 for the Russell 2000. The Nasdaq set a new multiyear high at 3817.98 on Oct. 1 with the Russell 2000 setting a new all-time high at 1087.78. The all-time highs are 15,709.59 for the Dow industrials (set on Sept. 18), 1729.86 for the S&P 500 (set on Sept. 19) and 6754.81 for the Dow transports (set on Sept. 20).

New monthly and semiannual risky levels are 15,932 and 16,775, respectively, for the Dow industrials, 1746.4 and 1853.8 for the S&P 500, 3830 and 4024 for the Nasdaq, 6811 and 7205 for the Dow transports and 1092.46 and 1163.21 for the Russell 2000.

My annual value levels remain at 12,696 for the Dow industrials, 1348.3 for the S&P 500, 2806 for the Nasdaq, 5469 for the Dow Transports, and 809.54 for the Russell 2000.

One of the six stocks previewed today is slightly undervalued, and one of the five overvalued is overvalued by 107.3%. Four of the five retail-wholesale stocks have buy ratings, and the other two have hold ratings. One is down 12.2% over the last 12 months, and the five gainers are up between 4.4% and 15.2%. One stock is below its 200-day simple moving average, while five are above their 200-day SMAs, which reflects the risk of reversion to the mean.

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 One-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: The price at which to enter a good 'til canceled 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.

Aluminum producer Alcoa ($7.96) closed above its 200-day SMA at $8.38 for two days on Sept. 18 and 19 and traded as low as $7.82 on Oct. 3. My weekly value level is $7.87 with a semiannual risky level at $11.33.

The members-only, big-box retailer Costco ( COST) ($114.44) set a multiyear high at $120.20 on Aug. 5 then traded as low as $110.19 on Aug. 29. My weekly value level is $113.43 with a monthly risky level at $118.92. My semiannual value level lags at $103.24.

The provider of industrial and construction supplies Fastenal ( FAST) ($51.26) set a multiyear high at $53.38 back on Feb. 20 with the 200-day SMA a key support at $48.72. My weekly value level is $49.05 with a semiannual risky level at $53.43.

The discount retailer Family Dollar ( FDO) ($72.55) set a multiyear high at $75.29 on Sept. 19. The 50-day SMA is $71.69 with a semiannual pivot at $73.03 with a monthly risky level at $73.39.

The casual dinning chain Ruby Tuesday ( RT) ($7.54) broke below its 200-day SMA at $8.24 on July 25 and traded to a low of $7.03 on Aug 28. My weekly pivot is $7.76 with a quarterly risky level at $62.23.

The owner of Kentucky Fried Chicken, Taco Bell and Pizza Hut, YUM! Brands ( YUM) ($71.53) set a multiyear high at $75.13 on Aug. 12 then tested and held its 200-day SMA at $69.10 on Sept. 4. My weekly value level is $68.75 with a semiannual risky level at $73.12.

At the time of publication, Suttmeier had no positions in stocks mentioned.

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

Richard Suttmeier is the chief market strategist at AlphaPlus Analytics in addition to ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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