Friday's Close Could Confirm Negative Weekly Charts

NEW YORK (TheStreet) -- Trader and investor whiplash continued this week, exemplified by the stock market reaction to Friday's January employment report. Dow futures traded between down about 70 points and up 80 points as nonfarm payrolls grew by a less than expected 113,000 with the unemployment ticking down to 6.6%.

Stock market volatility is not surprising as 77% of all stocks remain overvalued, according to www.ValuEngine.com, with 35.2% overvalued by 20% or more. All 16 sectors are overvalued with only four overvalued by more than 20%.

Here are the points of volatility for the five major averages:

The Dow Industrial Average (15,629) closed below its 200-day simple moving average at 15,488 Monday through Wednesday, but moved back above it on Thursday after setting a 2014 low at 15,341 on Feb. 5. The other major averages stayed well above their 200-day SMAs.

The S&P 500 (1773.4) traded to a 2014 low at 1,737.9 on Feb. 5 well above its 200-day SMA at 1711.4 then on Thursday rebounded back above its semiannual pivot at 1763.4 with a second semiannual pivot at 1797.3.

The Nasdaq (4057) stayed well above its semiannual value levels at 3930 and 3920 with a 2014 low at 3968 on Feb.5 well above its 200-day SMA at 3755.

The Dow Transportation Average (7182) traded to a 2014 low at 7010 on Feb. 5, well above its 200-day SMA at 6717 then rebounded back above its quarterly pivot at 7086 with semiannual pivots at 7245 and 7376. This morning Dow Transports is above 7245.

The Russell 2000 (1103.93) traded to a 2014 low at 1082.72 on Feb. 5 staying above its 200-day SMA at 1062.07, and its rebound has been below its semiannual pivots at 1130.79 and 1133.29.

The whipsaw pattern has been influenced by pivots that I have been describing as a tangled bowl of spaghetti. Even so, I expect all five major averages to eventually decline to their 200-day SMAs at some point in 2014.

The weekly charts are no longer overbought as all five have 12x3x3 weekly slow stochastic readings declining below 80.00 on a scale of 00.00 to 100.00 where readings above 80.00 are overbought.

Despite the choppy pattern, Friday's close may be below the five-week modified moving averages for all five major averages. In 2013 there were four attempts to confirm market cycle highs, but all five weekly charts never confirmed what we may confirm today. These non-confirmations led to subsequent new highs as stocks became more overvalued fundamentally and more overbought technically.

Simultaneous weekly closes below the five-week MMAs with declining weekly stochastics shift all five weekly charts to negative confirming stock market cycle highs.

Closes Friday below the five-week MMAs at 15,988 Dow Industrials, 1801.1 S&P 500, 4101 Nasdaq, 7274 Dow Transports and 1136.45 Russell 2000 would be the negative call that was avoided four times in 2013. The Nasdaq and Transports are the closest to a potential non-confirmations given closes today above 4101 and 7274, respectively.

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

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff

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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