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.

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HERE.

December 14, 2009 – A Dow Breakout will be a Fake-out

Bank Failure Friday shudders three. The Dow Bull / Bear Debate! The Obama Administration
now owns “The Great Credit Crunch.
Three small private community banks failed on Friday bringing the fourth quarter total to 38.
The deflation of the credit bubble continues as credit conditions remain tight. With increasing bad loans,
expect waves of bank problems and numerous bank failures.
Former Director of the Federal Housing Finance Agency, James Lockhart says that there will be
another leg down for housing because of the pace of foreclosures. He agrees with me that hundreds of
additional banks will fail.
As of December 11th, the tally for banks failures has reached 158, on the way to 500 to 800 by the end
of 2012 / 2013. There were 25 failures for all of 2008, 21 in the first quarter of 2009, 24 in the second
quarter, 50 in the third quarter, and now 38 so far in the fourth quarter.
Subscribe to the ValuEngine FDIC Quarterly Report, which includes our list of problem banks.
All three closures last Friday were overexposed to Construction & Development Loans and Commercial
Real Estate Loans, which I have said would be the Achilles Heel for the banking system since April
2006.
The Deposit Insurance Fund is now in arrears by an estimated $16.8 billion with $45 billion in three-
year of regular assessments due by the end of the month.
The Bulls cite positive fundamentals, but it’s the technicals that will decide the Bull / Bear
Debate.

With ValuEngine showing seven of eleven sectors overvalued and with elevated P/E ratios the
fundamentals can not justify a new bull market for stocks. Basic Industries is 14.5% overvalued, just as
the commodities carry trade appears to be ending. At the other end of the spectrum is Health Care at
10.5% undervalued with the features of the Health Care Bill still being ironed out in Congress.
Technically the multi-year bear market is over if the Dow breaks out above the downtrend that goes
back to October 2007 is broken to the upside and that resistance is 10,520 this week. This week’s pivot
is 10,435 and this month’s resistance is 11,035, which favors a breakout.
My call is for a false breakout that forces all shorts to be covered. Then when the fundamentals
deteriorate the new trading range market will seek its low end. The projected range is 6,500 to 11,500
in 2010.
The Obama Administration Owns “The Great Credit Crunch”.
Most on Wall Street say that the Recession is over – I don’t think so, but the NBER could use the
November hours worked at 33.2 up from 33.0 as the reason for it to time stamp the end in November.
On “Meet the Press” David Gregory asked White House economist Christina Romer, “Is the Recession
Over?” Her response was, “Of course not”. She later said that the Obama Administration inherited this
economy, but I say by continuing programs such as TARP, they now own it.
Dr. Romer was asked what the Unemployment Rate would have to be to declare an end to Recession
and her reply was a more normal number around 5%. Keep in mind that the unemployment rate was
4.6% when the NBER time stamped the Recession’s beginning at December 2007.
Former Fed Chair Alan Greenspan says that the unemployment rate will be lower a year from now, but
will remain elevated. His concern is that 38% of the unemployed have been so for more than 27 weeks.
He also re-iterated that the economy needs to create 100,000 jobs per month just to maintain a status
quo.
Send me your comments and questions to Rsuttmeier@Gmail.com. For more information on our
products and services visit www.ValuEngine.com.
That’s today’s Four in Four. Have a great day.

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