McDonald's and Netflix Headline Monday's Earnings

NEW YORK ( TheStreet) -- Today's buy-and-trade earnings previews cover two companies from the retail-wholesale, and one each in the computer and technology, consumer discretionary and finance sectors.

The stock market remains overvalued fundamentally but the technicals suggested new highs. This marks the third time this year that cycle highs could not be confirmed. When that happens new highs will likely follow, and that's the case except for Dow Industrials and Dow Transports.

As the Market Pulse below shows, Transports closed just below its Sept. 20 all-time intra-day high at 6754.81 with Industrials below its Sept. 18 all-time intra-day high at 15,709.59. Note the series of new highs set Thursday on five of the averages in the table.

The Nasdaq is above semiannual and monthly pivots at 3759 and 3830 and the Russell 2000 is above semiannual and monthly pivots at 1089.42 and 1092.46.

Monthly, semiannual and quarterly risky levels are 15,932, 16,490 and 16,775 Dow Industrials; 1746.4, 1743.5 and 1853.8 S&P 500; 4025 Nasdaq; 6811, 7104 and 7205 Dow Transports; and 1163.21 Russell 2000.

The ValuEngine valuation warning continues with 77.7% of all stocks being overvalued, 44.6% by 20% or more. In addition, 15 of 16 sectors are overvalued -- 14 by double-digit percentages, nine by 21.1% to 26.5%.

The retail-wholesale sector is 26.5% overvalued with an overweight rating; 80.3% of the 351 stocks in this sector have buy or strong buy ratings.

The computer and technology sector is 24.4% overvalued with an overweight rating; 47.5% of the 1160 stocks in this sector have buy or strong buy ratings.

The consumer discretionary sector is 23.7% overvalued with an equal-weight rating; 91.5% of the 405 stocks in this sector have hold ratings.

The finance sector is 19.9% overvalued with an equal-weight rating; 80.9% of the 3061 stocks in this sector have hold ratings.

Two of the five stocks in today's table have buy ratings and three have hold ratings. All five are overvalued, with one overvalued by 113.3%. All five have gains over the last 12 months one up 381.8%. Only one stock is below its 200-day SMA with four above, which reflects the risk of reversion to the mean.

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 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 is 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: is the price at which to enter a GTC Limit Order to sell on strength.

Hasbro ( HAS) set a multi-year high at $49.75 on Sept. 20, then traded as low as $45.45 on Oct. 16. The hold-rated game and toy maker is on the cusp of its 50-day SMA at $46.67. My semiannual value level is $45.27 with a quarterly pivot at $47.30 and weekly risky level at $49.23.

McDonald's ( MCD) set a recent low at $93.14 on Oct. 9 and is below its 50-day and 200-day SMAs at $95.97 and $97.51. The buy-rated Dow component has a weekly pivot at $96.37 and semiannual risky level at $98.47.

Netflix ( NFLX) set a multi- year high at $334.50 on Oct. 3, then traded down to $282.80 on Oct. 9 vs. the 50-day SMA at $294.90. The buy rated on-line moving rental service has a weekly value level at $318.67 and a weekly risky level at $344.39.

Texas Instruments ( TXN) set a multi-year high at $40.94 on Sept. 19, then tested $38.92 on Oct. 9. The hold-rated semiconductor company has a semiannual value level at $39.38 with a monthly picot at $41.33 and semiannual risky level at $42.15.

Zions Bancorp ( ZION) set a multi-year high at $31.40 on July 8, then traded as low as $26.79 on Sept. 30. The hold-rated regional bank is above its 50-day SMA at $28.64 with a weekly pivot at $27.78 and monthly risky level at $30.72.

At the time of publication the author had no position in any of the stocks mentioned.

This article was written 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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