On the Overvalued side, 7.2% of the market is Overvalued which is also an increase; in this case by 2.8 points. About ½ of the stocks in this group still have enough strength in their fundamentals to avoid a Sell consideration. (The stock’s price is higher than fundamentals, but not so high that they are extreme.) However, 2.9% of the market is both Overvalued and has not been able to be ranked well enough to maintain the high valuation and are considered Sell candidates, a 0.2 point increase.
There is increasing caution over earnings reports that will start coming out soon for the 3rd quarter. If they are disappointing, the resulting move downward in prices should not force valuations to become excessive because prices are currently near fair value. It would be more damaging if market prices were in overvaluation range and earnings disappointed. Investors appear to be preparing for disappointing earnings. If the earnings do not disappoint, there most likely will be a significant move to the upside.