NEW YORK (TheStreet) -- Over the past six months or so I have been suggesting that investors book stock market profits and raise cash to at least 50% of assets that would normally be invested in stocks.Allocations to stocks should focus on buy rated components of the Dow Industrial Average including General Electric ( GE), IBM ( IBM), Coca Cola ( KO), 3M Company ( MMM) and AT&T ( T). My main reason for caution is that I believe that Federal Reserve policy is creating a stock market bubble. Fundamentally, this thought is supported by the ValuEngine valuation warning that continues to intensify. We now show that 84.4% of all stocks are overvalued with 52.9% overvalued by 20% or more. All 16 sectors are overvalued with 12 overvalued by 22% to 33.6%. The technicals are now overbought on the weekly charts for the five major averages I follow. This week the Dow Industrial Average joined the S&P 500, Nasdaq, Dow transports and Russell 2000 with a 12x3x3 weekly slow stochastic reading at 80.68 above the 80.00 overbought threshold. The Dow's five-week modified moving average is 15,509. This configuration makes the weekly chart for the Dow positive but overbought. Investors should consider these 12 Dow components as a portion of a 50% allocation to stocks. One of the stocks is undervalued by 13.6% and the other 11 are overvalued by 6.0% to 30%. One of the stocks is down 3.3% over the last 12 months, while nine have gains of 10.5% to 43.9%. Three are below their 200-day simple moving averages while nine are above.
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. General Electric ($27.05) set a multi-year high at $27.19 on Nov. 7. This stock has a positive but overbought weekly chart profile with a monthly value level at $24.69 with a semiannual pivot at $26.68 and quarterly risky level at $28.47. Home Depot ( HD) ($76.18) set its multi-year high at $81.56 back on May 22. The stock has been moving sideways to down since then and is above its 50-day and 200-day SMAs at $75.73 and $74.51. My semiannual value level at $74.17 held at the second half 2013 on Sept. 6. This week's risky level is $76.88. IBM ($183.07) has been below its 200-day SMA since July 19 and traded to a 2013 low at $172.57 on Oct. 17. IBM is the only undervalued Dow component and it stayed below its 50-day SMA at $183.80 on Tuesday. My annual value level is $171.70 with a monthly risky level at $184.92 and the 200-day SMA at $196.21. Coca Cola ($39.88) has been trading back and forth around its 200-day SMA at $39.81 since Oct. 28 after rebounding from a second half 2013 low at $36.83 on Oct. 7. My weekly value level is $39.15 with a monthly pivot at $40.87 and quarterly risky level at $42.74. McDonalds ( MCD) ($97.66) has been trading back and forth around its 200-day SMA at $97.88 since August 15 and its second half 2013 low is $93.14 set on Oct. 9. My weekly value is $94.81 with a semiannual pivot at $98.47 and annual risky level at $99.38.
3M ($128.36) set a new multi-year high at $128.59 yesterday, which makes my quarterly risky level at $128.27 a pivot. My monthly value level is $125.50 with a weekly pivot at $127.95. Procter & Gamble ( PG) ($82.80) set a new multi-year high at $83.10 on Thursday after trading as low as $73.61 on Aug. 30. My monthly value level is $80.01 with a semiannual pivot at $81.86. AT&T ($35.17) has been trading back and forth around is 200-day SMA since May 29. The stock's second half 2013 low is $33.09 set on Oct. 8 and now AT&T is between its 50-day SMA at $34.57 and its 200-day SMA at $35.65. My semiannual value level is $32.14 with a monthly pivot at $35.17 and semiannual risky level at $38.14. United Health ( UNH) ($69.95) set a multi-year high at $75.88 on Sept. 16 then traded as low as $66.72 on Oct. 28. The stock is now below its 50-day SMA at $71.54. My weekly Value level is $68.82 with a semiannual risky level at $73.01. United Technologies ( UTX) ($107.45) set a multi-year high at $112.46 on Sept. 19 and currently rests on the cusp of its 50-day SMA at $107.07. My quarterly value level is $106.06 with a semiannual pivot at $107.61 and a monthly risky level at $109.13. Verizon ( VZ) ($50.16) set a second half 2013 low at $45.08 on Sept. 3 and has been above its 200-day SMA at $49.08 since Oct. 17. My semiannual value level is $49.86 with a weekly pivot at $50.15 and monthly risky level at $52.68. Wal-Mart ( WMT) ($78.71) set a second half 2013 low at $71.51 on Oct. 7 and has been above its 200-day SMA at $75.29 since Oct. 17. My semiannual value level is $74.96 with a weekly pivot at $77.33 and quarterly risky level at $80.09. At the time of publication the author held no positions in any of the stocks mentioned. Follow @Suttmeier This article is commentary by an independent contributor, separate from TheStreet's regular news coverage.