Stock Market Charts Are Positive, But Investors Should Beware

NEW YORK (TheStreet) -- I show new monthly, quarterly and semiannual risky levels for all five major equity averages with only one semiannual value level for each. This setup results in huge spreads between annual value levels and monthly, quarterly and semiannual risky levels.

At the beginning of the year, I described the pattern among the value levels, pivots and risky levels as a tangled bowl of spaghetti. Now the pattern is a "Black Hole" that lurks below positive weekly chart profiles and the semiannual value levels at 16301 for the Dow Jones Industrial Average, 1789.3 for the S&P 500 Index, 3972 Nasdaq Composite index, 7423 for Dow Transports and 1139.81 for Russell 2000.

The weekly charts are positive but overbought with the Russell 2000 still showing rising 12x3x3 weekly slow stochastics. The key to continuing to set new multiyear or all-time intraday highs are weekly closes above the five-week modified moving averages at 16720 for the DJIA, 1925.1 for the S&P 500, 4275 for the Nasdaq Composite, 8006 for Dow Transports and 1159.15 for the Russell 2000.

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Weekly closes below these key moving averages indicate risk to the semiannual value levels with that "Black Hole" risk to the annual levels at 14835 and 13467 for the DJIA; 1539.1 and 1442.1 for the S&P 500; 3471 and 3063 for the Nasdaq; 6249 and 5935 for Dow Transports; and 966.72 and 879.39 for the Russell 2000 later in the year.

Let's look at the potential volatility for the major equity averages:

DJIA (16827) has semiannual and annual value levels at 16301, 14835 and 13467, respectively, with monthly, quarterly and semiannual risky levels at 17364, 17753 and 18522, respectively.

S&P 500 (1960.2) has semiannual and annual value levels at 1789.3, 1539.1 and 1442.1, respectively, with monthly, quarterly and semiannual risky levels at 1994.2, 2052.3 and 2080.3, respectively.

Nasdaq (4408) has semiannual and annual value levels at 3972, 3471 and 3063, respectively, with monthly, quarterly and semiannual risky levels at 4529, 4569 and 4642, respectively.

Dow Transportation Average (8202) has semiannual and annual value levels at 7423, 6249 and 5935, respectively, with quarterly, monthly and semiannual risky levels at 8256, 8365 and 8447, respectively.

Russell 2000 (1192.96) has semiannual and annual value levels are 1139.81, 966.72 and 879.39, respectively with monthly, semiannual and quarterly risky levels at 1215.89, 1285.37 and 1293.11, respectively.

At the beginning to the year, I predicted that each of the five major averages would test its 200-day simple moving averages in 2014. The DJIA and Russell 2000 did so in the first half. The Nasdaq came close at its year-to-date low at 3946 on April 15.

The 200-day simple moving averages begin the second half of 2014 at 16124 for the DJIA; 1826.3 for the S&P 500; 4098 for the Nasdaq; 7372 for Dow Transports; and 1334.38 for the Russell 2000.

Here are my buy-and-trade levels for the three important market exchange traded-funds: 

SPDR Dow Jones Industrial Average (DIA)  ($167.89) has semiannual and annual value levels at $162.59, $148.05 and $134.45, respectively, with monthly, quarterly and semiannual risky levels at $172.92, $177.10 and $184.52, respectively. The weekly chart is positive but overbought with its five-week modified moving average at $167.11.

Nasdaq 100 Shares (QQQ) ($93.91) has semiannual and annual value levels at $85.91, $75.42 and $65.34, respectively, with quarterly, monthly and semiannual risky levels at $95.01, $95.95 and $100.33, respectively. The weekly chart is positive but overbought with its five-week modified moving average at $91.67.

S&P 500 SPDRS (SPY)($195.72) has semiannual and annual value levels at $178.73, $153.89 and $144.14, respectively, with monthly, quarterly and semiannual risky levels at $199.38, $204.92 and $207.51, respectively. The weekly chart is positive but overbought with its five-week modified moving average at $193.15. Here's the weekly chart.

Courtesy of MetaStock Xenith

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

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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