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December 10, 2010The ValuEngine Weekly is an Investor Education newsletter focused on the quantitative approach to investing and the tools

available from ValuEngine. In today's fast-moving and globalized financial markets, it is easy to get overloaded with information.The winners will adopt an objective, scientific, independent and unemotional approach to investing.

ATTENTION Investors and Finance Professionals:

If you are reading this you should sign up for ValuEngine's award-winning stock

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the newsletter.

Upcoming Suttmeier AppearanceValuEngine Chief Market Strategist Richard Suttmeier On the Road in

January

ValuEngine Chief Market Strategist Richard Suttmeier is a financial analyst for

media such as Fox News, CNBC,YahooFinance,the Wall Street Journal, New YorkTimes, CNNfn, and Bloomberg, Suttmeier has long been one of ValuEngine's "powerusers," supporting his own technically-focused analysis with VE's fundamentally-based

quant methods.

With all of the recent market

uncertainties, making the correct stockdecisions can be daunting. ValuEngine ChiefMarket Strategist Richard Suttmeier will beappearing at the AAII Orlando Chapter

meeting on January 19, 2011. We invite all VEclients in Florida to attend. At the meeting,Suttmeier will discuss the following topics:

How ValuEngine.com can help investors

adapt to volatile and risky marketconditions

How to implement a hedge fund-typestrategy for your own stock investment portfolio

How ValuEngines research helped me call both the top and the bottom of the

market over the past five years

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This meeting will take place at the University Club of Winter Park, 841 N. ParkAve. Winter Park, FL 32789. It starts at 6:30pm. Again, all VE clients are invited. We

place a special call out to those seeking individual investment advice, assistance,

and portfolio management.Subscribers can check out the latest from Suttmeier on a daily basis with his free

Four-in Four Daily newsletter. Sign upHERE.

MARKET OVERVIEWIndex started week Thursday Close 4 day change 4 day change % ytd

DJIA 11381.33 11370.1 -11.23 -0.10% 9.08%

NASDAQ 2591.28 2616.67 25.39 0.98% 15.55%

RUSSELL 2000 755.29 767.63 12.34 1.63% 21.23%

S&P 500 1223.87 1233 9.13 0.75% 10.73%

Summary of VE Stock Universe

Stocks Undervalued 41.70%

Stocks Overvalued 58.30%

Stocks Undervalued by 20% 19.27%

Stocks Overvalued by 20% 25.54%

SECTOR OVERVIEW

Sector Change MTD YTD Valuation Last 12-MReturn

P/ERatio

Aerospace -0.55% 2.09% 20.02% 5.14% overvalued 31.30% 19.19

Auto-Tires-Trucks -0.22% 5.79% 54.69% 12.52% overvalued 57.89% 25.76

Basic Materials 0.32% 2.54% 29.07% 25.41% overvalued 70.51% 36.58

Business Services 0.81% 4.30% 13.42% 4.77% overvalued 23.63% 29.59

Computer and Technology 0.35% 3.23% 27.60% 5.94% overvalued 34.74% 43.23

Construction 0.67% 5.57% 8.77% 3.49% overvalued 12.68% 36.19

Consumer Discretionary 0.44% 1.90% 21.42% 4.46% overvalued 28.47% 30.83

Consumer Staples 0.76% 3.11% 11.05% 9.00% overvalued 18.76% 26.73

Finance 0.38% 2.63% 15.89% 4.85% overvalued 17.59% 24.07

Industrial Products 0.47% 3.51% 23.62% 11.82% overvalued 31.75% 24.95

Medical 0.26% 2.06% 12.94% 7.98% undervalued 25.09% 36.61

Multi-Sector Conglomerates 0.44% 1.98% 23.54% 12.14% overvalued 33.25% 28.81

Oils-Energy 0.48% 2.76% 16.79% 20.82% overvalued 44.82% 40.13

Retail-Wholesale 0.00% 1.32% 19.19% 9.36% overvalued 65.86% 22.2

Transportation 0.17% 2.27% 24.37% 9.62% overvalued 30.76% 42.3

Utilities 0.14% 0.62% 5.75% 5.82% overvalued 14.52% 24.71

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Sector Talk-- Aerospace-DefenseEarlier this week a screen for short-term forecast return leaders provided some

interesting results. We queried our database looking for tickers ranked in the top 2%

One-Month Forecast Return category with share prices in excess of $3.00 andaverage volume of 100k shares/day. When we sorted the results by composite score--a broader quality measure which takes into account momentum, valuation, p/e

ratio, and market cap as well as the short-term forecast return--we found our resultsdominated by Aerospace-Defense Sector firms.

One wonders how these firms can be doing so well given the possibility of future

defense cuts, but analysts note that many have been preparing for that eventualityby cutting work forces and paring back on expenses. Like so many other big firms, theausterity measures are now paying dividends to the bottom line. The sector as a

whole is calculated to be overvalued, but the level of overvaluation is mildcompared to that found in the Basic Materials and Energy sectors.

Below, we present various top-five lists for the Aerospace-Defense Sector fromourInstitutional software package (VEI). These results were filtered by market priceand volume--no results below 3$/share or less than 100k shares/day volume.

Top-Five Aerospace-Defense Stocks--Short-Term Forecast Returns

Ticker Name Mkt Price Valuation(%)Last 12-MRetn(%)

RTN RAYTHEON CO 45.87 -11.59 -8.88

LLL L-3 COMM HLDGS 71.38 -16.52 -10.28

LMT LOCKHEED MARTIN 68.31 -3.58 -6.1

GD GENL DYNAMICS 68.89 -1.99 3.98

TGI TRIUMPH GRP INC 90.32 45.21 84.97

Top-Five Aerospace-Defense Stocks--Long-Term Forecast Returns

Ticker Name Mkt Price Valuation(%)Last 12-MRetn(%)

LLL L-3 COMM HLDGS 71.38 -16.52 -10.28

ATK ALLIANT TECHSYS 77.69 -10.43 -12.07

RTN RAYTHEON CO 45.87 -11.59 -8.88

NOC NORTHROP GRUMMN 63.61 -10.31 20.61

LMT LOCKHEED MARTIN 68.31 -3.58 -6.1

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Top-Five Aerospace-Defense Stocks--Composite Score

Ticker Name Mkt Price Valuation(%) Last 12-MRetn(%)

NOC NORTHROP GRUMMN 63.61 -10.31 20.61

BA BOEING CO 64.61 -8.27 19.38

LLL L-3 COMM HLDGS 71.38 -16.52 -10.28

RTN RAYTHEON CO 45.87 -11.59 -8.88

GD GENL DYNAMICS 68.89 -1.99 3.98

Top-Five Aerospace-Defense Stocks--Most Overvalued

Ticker Name Mkt Price Valuation(%)Last 12-M

Retn(%)LDSH LADISH COMPANY 47.73 105.83 217.78

ESL ESTERLINE TECHN 64.56 45.72 52.01

TGI TRIUMPH GRP INC 90.32 45.21 84.97

TDG TRANSDIGM GROUP 70.46 41.03 53.24

BEAV BE AEROSPACE 37.73 30.54 70.88Subscribers can check out the latest valuation, forecast, and ratings figures on

the Aerospace-DefenseSector from our Models HERE.

Not a ValuEngine Premium Website member? Then please consider signing up

for our no obligation, two-week free trial today. ValuEngine's award-winning stockValuation and Forecast Models continue to provide investors with accurate,objective, and timely information on more than 5,700 US stocks, ADRs, and foreign

equities that trade on US markets. Over the last few months, our stock picks haveprovided clients with many winners in both up and down periods

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What's Hot

-- AAII Selects ValuEngine as Best Valuation Service,

AGAIN

ValuEngine is pleased to announce that the American Association of Individual

Investors has selected us as one of their "Best Websites" for stock valuation andratings. We have won this award for at least 5-6 years now and we are the only paysite which made the cut. The AAII award follows on the heels of our award as "Best of

the Web" from Forbes.com for our stock screening functions.

--FDIC Q3 2010 Report is Posted

Suttmeier's Banking Report Finds A System Under Continuing Stress

ValuEngine Chief Market Strategist Richard Suttmeier is an expert on the USBanking System and uses the health of the system as a leading economic

indicator. He distills his thoughts on the banking system in our FDIC Report. The latestupdate of the report is now available.

Suttmeier remains bearish in his outlook for both US banks as well as the US

housing market. In his summary of the report he notes the following:

The FDIC Quarterly Banking Profile for Q3 2010 essentially shows the

banking system in limbo as earnings improve slightly with net income at $14.5

billion up from $2 billion a year earlier, but below the incomes of Q1 and Q2.The rise in net income is a result of lower loan-loss provisions, which masks the

fact that the banking system still has significant risk to real estate loans that arekept current as percentage of loans outstanding versus loan commitmentsincrease adding stress to bank balance sheets particularly among community

banks

The Federal Reserve has embarked on a $600 billion QE2 program that isdesigned to lower US Treasury yields to help consumer rates on Main Street. The

yield on the 10-Year was 2.334 on October 8th in anticipation of QE2. That yieldwas 3.054 on December 3rd, up 72 basis points, which to me defines total

failure for the Federal Reserve.

We recently learned that the Unemployment Rate in the United Statesrose to 9.8% as the number of unemployed Americans jumped 300,000 in

November. Recent surveys of home prices are showing another round ofdeclines, and 25% on home sales consist of depressed properties sold throughforeclosures and short sales.

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The National Association of Home Builders complains that they wouldstart to build more homes if community banks would provide construction

loans. Community banks are reluctant to do so as C&D loans continue to be

the bulk of their problem loans dating back to 2003 through 2007.Thus I conclude that the Great Credit Crunch continues and private

investors need an FDIC program to help clear the pipeline and provide capitalto return banks back to the business of lending.

Without a housing recoverywhich is necessary to improve the health ofthe community banks, Main Street USA will remain under duress as highunemployment will continue to retard economic growth.

A critical portion of this report is the ValuEngine List of Problem Banks. Problembanks are publicly traded FDIC insured financial institutions who are overexposed toConstruction & Development Loans and/or Nonfarm nonresidential real estate loans,

with 1-Engine--Strong Sell, or 2-EngineSell. The report also includes a listing of allother engine-rated banks-- and those with n/a ratings but forecast figure datapoints according to our models-- in violation of FDIC guidelines vis-a-vis loan

exposures.

As of December 9, 2010, there were 240 banks overexposed to C&D and/or

CRE loans in the ValuEngine database with full data coverage. There were fouradditional overexposed banks with partial data coverage.

Of these overexposed banks, 62 were rated 1-Engine Strong Sells, 64 wererated 2-Engine Sells, 106 were rated 3-Engine Holds, seven were rated a 4-

Engine Buy, and one was rated a 5-Engine Strong Buy.This means that there are currently 126 banks rated Sell or Strong Sell that are

also overexposed to C&D and/or CRE loans.

There are 280 additional institutions listed as a problem bank list but do notappear in the ValuEngine database but are carrying C&D and/or CRE loans in excessof the FDIC guidelines.

Our latest ValuEngine FDIC Report is now posted. The report contains loanexposure and/or ValuEngine datapoints on valuation, forecast, and ratings for all of the

institutions on our List of Problem Banks.

Subscribers can download itHERE.

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Others interested in the report may find out more on our website by clicking the imagebelow.

Suttmeier Says

--Commentary and Analysis from Chief Market Strategist

Richard Suttmeier

If you have any comments or questions, send them to Rsuttmeier@Gmail.com

Treasury Yields

10-Year-- (3.225) Daily and semiannual value levels are 3.306 and

3.479 with a weekly pivot at 3.142, and annual pivots at 2.999 and2.813, and quarterly, semiannual and monthly risky levels at 2.265,2.249 and 1.949. The US Treasury yields have stabilized since the

$21 billion 10-Year note auction that came at 3.340 on Wednesday.

Commodities and Forex

Comex Gold-- ($1385.9) Quarterly, semiannual and annual value levels are $1306.4,$1260.8, $1218.7 and $1115.2 with a weekly pivot at $1400.5, and daily and monthlyrisky levels at $1422.9 and $1443.5. Comex Gold reached that all time high at $1432.5

on Tuesday and remains above its 50-day simple moving average now at $1361.9.Gold has been above the rising 50-day since August 12th.

Nymex Crude-- (($88.45) Semiannual, annual and monthly value levels are $83.94,$77.05 and $75.50 with a weekly pivot at $86.30, and daily, semiannual and annualrisky levels at $89.85, $96.53 and $97.29. Nymex Crude oil traded to a 52-week high at

$90.76 on Tuesday and my semiannual value level remains at $83.94. Note that

Tuesday was a Key Reversal Day.

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The Euro--(1.3244) My monthly value level is 1.2500 with daily and quarterly pivots at

1.3339 and 1.3318, and weekly and semiannual risky levels at 1.3473 and 1.4733.The

euro remains below my quarterly pivot at 1.3318 with the 200-day at 1.3115.

Major Indices

The S&P 500 closed above its 61.8% Fibonacci Retracement at 1228.74, but willthat be enough to pull the Dow Industrials to a close above 11444.08 to confirmanother Dow Theory Buy Signal? Or, will the S&P fail with the Dow having a double-

top at 11,450 instead?

The Dow--

Daily: (11,370) Semiannual, annual, monthly and quarterly value levels are 10,558,10,379, 10,325 and 8,523 with annual and semiannual pivots at 11,235 and 11,296, and

weekly and daily risky levels at 11,440 and 11,579. The Dow Industrial Average needsa close above 11444.08 to confirm another Dow Theory Buy Signal. If not the Dow risks

a double-top at 11,450 instead.

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latest thinking on the state of the market.

I also provide my proprietary analytical action price levels to Valuengine'sWeekly ETF Reportsubscribers. Investors who trade the most popular index,commodity, and sector ETFs can thus add or reduce their positions as appropriate

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