Stocks Will Correct by 10% to 15% in 2014 Even If New Highs Occur First

NEW YORK (TheStreet) -- On Thursday I ran my proprietary analytics for the end of 2013 assuming that the Dec. 31 closes would equate to the closes on Wednesday after the huge stock market gains that followed the FOMC decision to begin tapering of quantitative easing in January. Included in today's post are buy-and-trade parameters for SPDR Dow Jones Industrial Average  (DIA), Nasdaq 100 Shares (QQQ) and the S&P 500 SPDRS (SPY). But first let's focus on Treasury yields, gold, crude oil and the euro vs. the dollar.

The yield on the Treasury 10-year note (2.883% on Wednesday) will have a monthly value level at 3.590% with quarterly and annual risky levels at 2.565% and 2.231%. The key to preventing higher yields will be a weekly close below 2.565%.

The yield on the Treasury 30-year bond (3.898% on Wednesday) will have a monthly value level at 4.475% with a quarterly pivot at 3.771% and annual risky level at 3.253%. The key to preventing higher yields will be a weekly close below 3.771%.

Comex Gold ($1,219.5 on Wednesday) will begin 2014 with a monthly value level at $1,119.6 with a quarterly risky level at $1,392.5. The gold bubble has popped, but there should be buy-and-trade opportunities on weakness to value levels.

Nymex Crude Oil ($97.91 on Wednesday) will begin 2014 with a monthly pivot at $98.21 without a value level. There will be two zones of risky levels; A semiannual risky level at $109.84 and quarterly and annual risky levels at $114.36 and $115.23. Strength in oil depends upon demand which depends upon a Main Street economic recovery.

Euro vs. dollar (1.3692 on Wednesday) will begin 2014 with annual, quarterly and monthly pivots at 1.3368, 1.3454 and 1.3631. Semiannual value levels are at 1.2628 and 1.2189 with an annual risky level at 1.5484.

Dow Industrials (16,168 on Wednesday) will have an annual value level at 14,653 with semiannual and monthly pivots at 16,064 and 16,145 and quarterly and semiannual risky levels at 16,580 and 16,769. In this scenario the upside is 3.6% with a downside potential of 9.4%.

S&P 500 (1810.7 on Wednesday) will have an annual value level at 1522.3 with semiannual pivots at 1788.9 and 1747.7 and monthly and quarterly risky levels at 1830.2 and 1879.2. The upside is 3.8% with downside risk of 15.9%.

Nasdaq (4070 on Dec. 18) will have an annual value level at 3424 with semiannual pivots at 3907 and 3873 and monthly and quarterly risky levels at 4219 and 4227. The upside is 4.2% with downside risk of 15.6%.

Dow Transports (7207 on Dec. 18) will have an annual value level at 6163 with quarterly, semiannual and monthly pivots at 7000, 7159 and 7241 and a semiannual risky level at 7333. The upside should be limited to 1.8% with downside risk of 14.5%.

Russell 2000 (1133.72 on Dec. 18) will have an annual value level at 953.42 with semiannual pivots at 1124.14 and 1120.00 and quarterly and monthly risky levels at 1167.05 and 1187.25. The upside is 5.5% with downside risk of 15.3%.

Dow Jones Industrial Average ($161.76 on Wednesday) will have an annual value level at $146.40 with semiannual and monthly pivots at $160.41 and $161.58 and quarterly and semiannual risky levels at $165.54 and $167.00. Diamonds has a parabolic weekly chart profile with the five-week modified moving average at $158.55 and a 12x3x3 weekly slow stochastic reading at 88.95, which is well above the overbought threshold at 80.00. If the bubble pops the risk is to the 200-week simple moving average at $127.04.

Nasdaq 100 Shares ($86.14 on Wednesday) will have an annual value level at $74.61 with semiannual pivots at $84.18 and $83.78 and monthly and quarterly risky levels at $88.28 and $90.12. The Q's has a parabolic weekly chart profile with the five-week MMA at $84.07 and a 12x3x3 weekly slow stochastic reading at 94.43, which is well above the overbought threshold at 80.00. If the bubble pops the risk is to the 200-week simple moving average at $61.38.

S&P SPDRs Fund ($181.70 on Wednesday) will have an annual value level at $152.56 with semiannual pivots at $178.83 and $174.95 with monthly and quarterly risky levels at $183.59 and $188.22. SPDRs has a parabolic weekly chart profile with the five-week modified moving average at $178.46 and a 12x3x3 weekly slow stochastic reading at 92.73, which is well above the overbought threshold at 80.00. If the bubble pops the risk is to the 200-week simple moving average at $136.64.

If there is significant upside or downside volatility between now and the Dec. 31 closes, the key levels will be revised, but the overall risk/reward should not change significantly.

At the time of publication the author held no positions in any of the stocks mentioned.

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

Richard Suttmeier is the chief market strategist at 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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