Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.

ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock

picks, and commentary can be found HERE.

Suttmeier's Four in Four video can be watched on the web HERE.

September 15, 2009 – Beware that Stocks are Overvalued and Overbought

Valuations are stretched and Stocks are overbought. I still say that we are in a multi-
year bear market and that the bear market rally will eventually end.
What a difference six months can make, as stocks swing from being cheap to being
expensive.
On March 6th I predicted that the S&P 500 could rise 40% to 50% in what I described as a
Bear Market Rally. All eleven sectors tracked by ValuEngine were 32% to 45% undervalued
and finding stocks to buy was like shooting fish in a barrel. What was strange about this call
was that 85% of traders and investors disagreed with me, and only 5% agreed.
Today nine of eleven sectors are overvalued with Basic Industries 17.6% overvalued and
Capital Goods 19.6% overvalued. Now finding a stock worth buying is like finding a needle in
a haystack.
Reviewing the Technicals that prompted my call for a Bear Market Rally
On March 6th I looked at the monthly chart for the S&P 500 and noted that the 666.96 low was
on the up trend that connects the lows of the 1980’s and that the market had retraced 61.8%
of the entire bull market rally that began in 1982 and ended in October 2007.
My goal was to capture upside from 666.96 to my annual pivots at 910.80 and 967.10 and
that mission was accomplished. I must admit that on May 8th I did not project that the 38.2%
retracement at 1007.44 would be tested.
Look at the monthly chart and you will see why I say that we are in a multi-year bear market.
There is a double-top shown in March 2000 and October 2007. Also note that the 120-month
simple moving average is declining. Now 85% disagree with my bearish call! I guess most
traders do not like to buy low, sell high?
The weekly chart shows how far the overbought S&P 500 can now go.
The weekly chart for the S&P 500 shows an extreme overbought momentum reading, which I
call MOJO. The reading is 9.2 on a scale of zero to ten. The last time SPX was this
overbought was in 2007, when the multi-year bear market began.
I have been tracking the market higher by projecting that the S&P 500 would stay within the
Ascending Wedge pattern shown on the weekly chart. That resistance is 1063.24 this week
with support just above my annual pivot at 967.10.
Clearly there is a down trend connecting the highs since October 2007, which is the multi-
year bear market trend. I don’t expect strength to reach this down trend given the MOJO
reading, but the Ascending Wedge points to 1125 in mid-November, shy of the 1200 in my
800 before 1200 prediction.
Note also that the 200-week simple moving average is declining, which is another bear sign.
The daily chart for the S&P 500
Today’s support is 1025.25 with resistance at 1059.4. The daily chart is positive with the 21-
day simple moving average ending Monday at 1017.8.
To sum it up, 2009 is becoming like 2007 when I became bearish in March, and stuck with my
guns, then pounded the table in October 2007 saying, “Beware of the Ides of October, as
solid gold earnings are factored into Dow 14K.” History proved that call to be correct, so I see
no need to back track now from my long-term view that “The Great Credit Crunch” is far from
over. The multi-year bear market will return.
Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on
our products and services visit www.ValuEngine.com
That’s today’s Four in Four. Have a great day.

Richard Suttmeier
Chief Market Strategist
ValuEngine.com
(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website
www.ValuEngine.com. I have daily, weekly, monthly, and quarterly newsletters available that track a variety of
equity and other data parameters as well as my most up-to-date analysis of world markets. My newest products
include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. I hope that you will go to
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“I Hold No Positions in the Stocks I Cover.”