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March 30, 2011

VALUATION WATCH: Our models find that overvaluation is
approaching critical levels. Overvalued stocks now make up
almost 61% of our universe and almost 29% of the universe is
calculated to be overvalued by 20% or more. All Sectors are
calculated to be overvalued.

Valuation Watch is Back!

ValuEngine Market Valuation Figures Inch into the Danger Zone (Again...)
The ValuEngine Valuation Model tracks more than 5500 US equities, ADRs, and
foreign stock which trade on US exchanges. The model calculates a level of
mispricing or valuation percentage for each equity based on what the stock should
be worth if the market were totally rational and efficient--an academic exercise to be
sure, but one which allows for useful comparisons between equities, sectors, and
industries.
We track valuation figures and use them as a metric for making calls about the
overall state of the market. As of last night's close, our overall universe overvaluation
and overvalued by 20% or more figures have reaches levels which have been
correlated with market dips in the past.
Whenever we see levels in overvaluation levels in excess of @ 60% for the
overall universe and 27.5% for the overvalued by 20% or more categories, we issue a
valuation watch. ValuEngine has issued a market valuation watch as of today, March
31st. This is a time for investors to keep a close eye and the market and to consider
booking some profits and perhaps hedging against a move to the downside.
We recently called off a Valuation Watch which had been in effect since
December 15, 2010. We began our Valuation Watch with the SP 500 at 1241 and
called it off with the benchmark around 1275. Over the period of this Valuation
Watch, we issued Valuation Warnings whenever our overall universe overvaluation
figure exceeded 64.5%. We issued a total of 14 warnings during this period.
 Below is a chart which tracks our overvaluation calculations for the duration of
our most recent Valuation Watch from December 13-March 11. Here you can see
what the market did during our last Valuation Watch. This is real tracked data,
gathered from our website on an almost daily basis. The overall overvaluation
calculation is represented by the yellow line. The red columns represent days when
we issued our Valuation Warnings (when the overall valuation figure exceeded
65%. ) The blue line is the SP 500 close.

We issue our latest Valuation Watch with the SP 500 at the 1319 level and the
overall universe valuation figure at 60.89%. Of course, as always past performance is
no indication of future behavior. Given the wild gyrations of the markets over the
past few years, it has been tough to rely completely on any fundamentally or
technically-based mode of analysis. As always, shorting in a bubble can kill and
must be utilized prudently.
In addition to the overall valuation metrics, we see that on a sector basis ALL
sectors are calculated to be overvalued. In the past, our Chief Market Strategist
Richard Suttmeier has used the sector valuation figures to buttress his macro market
calls. Almost half of the sectors are calculated to be overvalued by almost 10% or
more. This is another indicator that stocks are no longer a bargain and that investors
should consider implementing additional risk management tools and/or booking
some profits.

Subscribers can check out the latest figures on MARKET VALUATION from our models
HERE. You can check out the SECTOR VALUATION figures HERE.
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MARKET OVERVIEW
Summary of VE Stock Universe
Stocks Undervalued 39.18%
Stocks Overvalued 60.82%
Stocks Undervalued by 20% 16.72%
Stocks Overvalued by 20% 28.87%

SECTOR OVERVIEW
Sector Change MTD YTD Valuation Last 12- P/E
MReturn Ratio
Aerospace 0.29% 3.52% 14.56% 14.22% overvalued 25.32% 18.74
Auto-Tires-Trucks 0.72% 0.36% -4.18% 8.89% overvalued 33.40% 19.78
Basic Materials 0.91% -0.50% -1.38% 12.75% overvalued 49.68% 44.24
Business Services 0.64% 1.23% 3.80% 8.84% overvalued 13.24% 49.96
Computer and Technology 0.83% 1.42% 10.79% 8.63% overvalued 31.63% 40.66
Construction 0.42% 1.35% 1.21% 9.81% overvalued 10.87% 35.89
Consumer Discretionary 0.59% -0.04% 3.39% 9.79% overvalued 15.42% 32.16
Consumer Staples 0.33% -0.37% -0.82% 9.35% overvalued 13.61% 21.21
Finance 0.20% -1.31% 1.95% 7.34% overvalued 8.40% 26.21
Industrial Products 0.60% 2.14% 5.55% 9.77% overvalued 25.34% 35.45
Medical 0.76% 2.48% 10.52% 0.71% overvalued 12.62% 37.85
Multi-Sector Conglomerates 0.32% 2.36% 4.00% 16.11% overvalued 26.44% 27.29
Oils-Energy 0.98% 2.03% 11.29% 26.54% overvalued 45.82% 46.08
Retail-Wholesale 0.63% 3.37% 4.27% 8.12% overvalued 19.46% 24.48
Transportation 0.11% 2.88% -0.52% 12.08% overvalued 20.98% 21.43
Utilities 0.85% 1.57% 2.73% 9.88% overvalued 15.41% 21.57