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

ValuEngine is a fundamentally-based quant research firm in Newtown, PA. ValuEngine

covers over 7,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,
and commentary can be found at http://www.valuengine.com/nl/mainnl

December 29, 2010 – Home Prices resumed their decline, which is my #1 theme
On Tuesday I published the first five of my eleven themes for 2011.
Number One - Home Prices will resume a decline that began in mid-2006.
• We had the home buyer tax credits expire in mid-2010, and government sponsored mortgage
modifications provided limited help.
• In 2011 we face continued foreclosure issues including questionable documentation, and banks
have a record high Other Real Estate Owned (OREO). OREO is up to $53.2 billion at the end of
the third quarter, up 338.2% since the end of 2007.
• Depressed home sales are being sold at a 30% to 35% discount, which reduces property
appraisals at the county level.
• Home builders will have to compete with these lower prices and we need a mortgage
modification program for all Americans, not just those at risk of losing their homes.
• QE2 is not working and US Treasury yields are higher causing mortgage rates to rise.
• “The Great Credit Crunch” began with housing, and that foundation needs repair before
Main Street can recover with sustainable job creation.
On Tuesday we learned that home prices are on the decline again according to Case-Shiller,
and that the Conference Board’s Consumer Confidence fell to 52.5 in December. The National
Association of Home Builders Housing Market Index remains depressed at 16 when a reading of 50 is
neutral. The Consumer Confidence reading at 52.5 is depressed considering that 90 to 120 is the
neutral zone.
• The 20-City Composite from the Case-Shiller Home Price Index fell 1.3% sequentially in
October and 0.8% year over year with Atlanta, Charlotte, Miami, Portland, Seattle and Tampa
hitting new lows since home prices began to fall in mid-2006.
• Home sales are down 25% year over year and the supply of unsold homes is up 50%, and
housing starts are near thirty year lows.
• From the mid-2006 peak to current home prices are down 29.6%.
• The 20-City Composite is still 50% above its starting point at the end of 1999.
Tracking the US Capital Markets – US stocks are overvalued fundamentally and overbought
technically on both daily and weekly charts.
• The major equity averages are below this week’s risky levels as the year draws to a close at:
11,629 Dow, 1269.4 SPX, 2682 NASDAQ, 5215 Dow Transports and 808.57 Russell 2000.
• Fifteen of sixteen sectors are overvalued according to ValuEngine with only 36.2% of all stocks
undervalued. At 35% the stock market tends to find a top. Only 16.9% of all stocks are
undervalued by 20% or more.
The Yield on the 10-Year Note (3.466) – This week’s value level is 3.494 has held on weakness with
today’s risky level at 3.264.
Comex Gold ($1405.7) – Today’s value level is $1387.4 with this week’s pivot at $1401.2 and monthly
risky level at $1443.5.
Nymex Crude Oil ($91.23) – Today’s pivot is $91.38 with this week’s risky level at $93.28.
The Euro (1.3116) – Today’s value level is 1.3060 with my quarterly pivot at 1.3318, which goes away
at the end of the year.
The Dow Industrial Average (11,576) – Remains extremely overbought on both daily and weekly
charts. The five-day modified moving average is 11,523 with daily and weekly risky levels at 11,618
and 11,629.
That’s today’s Four in Four. Have a great day.
Richard Suttmeier
Chief Market Strategist
ValuEngine.com, (800) 381-5576
Send your comments and questions to Rsuttmeier@Gmail.com. For more information on our products and services visit
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As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I have daily, weekly, monthly, and
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“I Hold No Positions in the Stocks I Cover.”