11 Dow Components vs. Their 200-Day Moving Averages

NEW YORK (TheStreet) -- The U.S. stock market continues to trade under the cloud of a ValuEngine valuation warning. In this environment I have been warning about downside risk to the 200-day simple moving averages as a reversion to the mean. Today I profile 11 Dow Industrial Average components that either crossed below their 200-day SMAs, or are close to doing so.

In recent weeks the Dow has been the laggard among the five major equity averages I follow as key to timing a confirmation of a stock market peak.

Stock market strength continues to be artificially propped up by the Federal Reserve's monetary policy of a 0% to 0.25% federal funds rate since Dec. 16, 2008. On Sept. 13, 2012, the Fed launched QE3, the purchase of $40 billion a month of agency mortgage-backed securities, and on Dec. 12, 2012 the Fed added QE4, the purchase of $45 billion a month of longer maturity Treasury notes and bonds. In my opinion these policies have failed and the stock market has become a bubble ready to pop under what I call, 'QE-Fatigue'.

Now that President Obama has nominated Janet Yellen as the next Fed Chairman markets will assume more of the same with regard to continuing this failed monetary policy.

The five major equity averages may soon be in sync confirming cycle highs for the stock market with closes this week and next below five-week modified moving averages at 15,121 Dow Industrials, 1675.8 S&P 500, 3703 Nasdaq, 6511 Dow transports and 1051.68 Russell 2000.

Among the 11 Dow components in today's table, four have buy ratings and seven have hold ratings. Two are undervalued by 5.3% and 12.6% and nine are overvalued by 6.1% to 32.2%. Two are down 7.6% and 12.9% over the last 12 months with five up between 11.8% and 29.1%. Two have held their 200-day SMAs with four just below and five well below 200-day SMAs. This reflects the reversion to the mean that I have been discussing in my buy-and-trade strategies.

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.

Caterpillar ( CAT) ($83.52) traded below its 200-day SMA back on March 19 and traded to a 2013 low at $79.49 on April 22. The stock attempted to get back above its 200-day in May, in mid-July and in mid-Sept. but gains could not be sustained. The low end of the trading range has been between $82 and $81 and the 200-day since mid-May. The stock has had a hold rating with a monthly value level at $71.51 with a weekly pivot at $84.14, the 200-day at $87.37 and annual risky level at $96.43.

Cisco ( CSCO) ($22.50) had been above its 200-day SMA since Nov. 21 until this week with the 200-day at $22.74. The stock has a buy rating and held my semiannual value level at $22.39 on Wednesday. My annual pivot is $22.76 with a semiannual risky level at $23.47.

Chevron ( CVX) ($116.13) had been above its 200-day simple moving average since the end of 2012 until last week when the stock closed below its 200-day at $119.65 on Oct. 3. The stock has a hold rating with a semiannual value level at $113.49, a weekly pivot at $119.50 and semiannual risky level at $122.26.

Goldman Sachs ( GS) ($154.44) has been above its 200-day SMA for at least 52 weeks and tested and held its 200-day at $153.17 the last two days. The stock has a hold rating with a semiannual value level at $123.16 with a weekly pivot at $156.71 and monthly risky level at $160.78.

IBM ( IBM) ($181.32) has been below its 200-day SMA at $198.10 since June 20, with this level re-tested to the upside on July 18. The stock has recently been upgraded to buy and traded to a new 52-week low at $178.71 on Tuesday. My annual value level is $171.70 with a weekly pivot at $184.04 and a monthly risky level at $188.81.

Intel ( INTC) ($22.59) which is just below the 200-day SMA at $22.62. The stock has a hold rating with an annual value level at $19.60, a weekly pivot at $23.00 and monthly risky level at $24.81.

JPMorgan ( JPM) ($50.75) had been above its 200-day SMA since Nov. 16 until Sept. 25 and is just above its 200-day SMA at $50.74 at Wednesday's close. The stock has a hold rating with a semiannual value level at $50.37 with a monthly risky level at $55.71.

Pfizer ( PFE) ($28.29) had been holding its 200-day SMA since Aug. 27 and closed Wednesday just below the 200-day at $28.32. The stock has a hold rating with a semiannual value level at $23.02 with a semiannual pivot at $28.62 and monthly risky level at $29.48.

Procter & Gamble ( PG) ($76.95) last tested its 200-day SMA on weakness on Nov. 15, and has been below its 200-day at $77.31 since Sept. 30. The stock has a buy rating with a semiannual value level at $65.39, an annual pivot at $75.13 and annual risky level at $78.73.

Verizon ( VZ) ($46.20) had been above its 200-day SMA since Jan. 30 and has been trading back and forth around this key moving average since Aug. 16. Today the 200-day is a resistance at $48.30. The stock has a buy rating with a semiannual value level at $42.34, a weekly pivot at $45.30 and semiannual risky level at $49.86.

Exxon Mobil ( XOM) ($85.16) was last above its 200-day SMA on Aug 12. The stock has a hold rating and set a new 2013 low at $84.83 on Wednesday well below the 200-day at $89.62. The stock has a hold rating with a semiannual value level is $75.04, a weekly pivot at $84.04 and monthly risky level at $88.35.

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 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

More from Opinion

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Latest Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Elon Musk's Twitter Tirade Is the Dumbest Thing on Wall Street

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Why Google's Search Momentum Won't Be Badly Hurt by New EU Rules

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Flashback Friday: Amazon, Chip Stocks, Memorial Day

Time to Talk Tesla: What Happened This Week, Elon?

Time to Talk Tesla: What Happened This Week, Elon?