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.

April 1, 2010 – The Second Quarter begins with Stocks Overvalued and Overbought

Higher US Treasury yields will put a drag on equity valuations. The zero percent funds rate will
refuel commodity speculation re-inflating bubbles for gold and crude oil. The euro is still well
above its 120-month simple moving average. Ten of eleven sectors are overvalued according to
ValuEngine, as monthly charts become overbought for the major equity averages, and as
resistances loom.
The yield on the 10-Year US Treasury shows risk of rising to 4.250 with the 120-month simple
moving average at 4.331. With the Federal Reserve no longer buying GSE mortgages and debt,
mortgage rates should start to rise again. The spread between the 10-Year and mortgage rates have
declined to between 100 and 125 basis points, which should keep mortgages stable for now, but
refinancings will become more difficult to justify. Remember that a higher 30-Year bond yield is a direct
drag on equity valuations making stocks less undervalued and more overvalued.

Courtesy of Thomson / Reuters

Whenever the Fed keeps the Federal Funds Rate below 3% commodity speculation becomes a
problem, which eventually creates bubbles, which kills economic growth. Gold and crude oil well
above 120-month simple moving averages is a sign of bubbles reforming.
Comex Gold shows a new quarterly support at $1052.8 with my annual pivot at $1115.2 and
semiannual and monthly resistances at $1186.5 and $1202.5, so the trading range continues.

Courtesy of Thomson / Reuters

Nymex Crude Oil shows a new monthly pivot at $84.54, which was tested as the second quarter
begins. My annual support is $77.05 with annual resistance at $97.29.

Courtesy of Thomson / Reuters

The euro remains well above its 120-month simple moving average after an extremely weak first
quarter. My new quarterly support is 1.2450 with monthly resistance at 1.4081.

Courtesy of Thomson / Reuters

Stocks are overvalued according to ValuEngine. It is tough to pick stocks to buy when 43.7% are
undervalued and 56.3% are overvalued. Ten of eleven sectors are overvalued. Only Technology is
undervalued, but by only 1%. 12-month and year to date gains are great, but sustaining them gets
more difficult with these overvalued readings and extended P/E ratios.
The Dow has broken out above its 120-month simple moving average, but now the S&P 500, as
both become overbought on their monthly chart. 2010 has the look and feel of 2007.
The Dow has become overbought on its monthly chart with the 120-month simple moving average as
support at 10,460. My annual pivot is 10,379 with monthly, annual and semiannual resistances at
11,228, 11,235 and 11,442. Quarterly support lags at 7,490.

Courtesy of Thomson / Reuters

The S&P 500 ended the first quarter overbought on its monthly chart and just below its 120-month
simple moving average at 1178.79, which lines up with my annual pivot at 1179. I show tight
semiannual and monthly resistances at 1194.6 and 1199.6 with semiannual resistance at 1281.1. My
quarterly support lags at 805.4.

Chart Courtesy of Thomson / Reuters

That’s today’s Four in Four. Have a great day.
Richard Suttmeier
Chief Market Strategist
www.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 www.ValuEngine.com and review some of the sample
issues of my research.

“I Hold No Positions in the Stocks I Cover.”