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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.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,
and commentary can be found HERE.

Suttmeier's ForexTV Main Street vs Wall Street can be watched on the web HERE.

February 26, 2010 – Measuring Stress in the Banking System

Investors snap up US Treasuries this week as Risk Aversion trumps Supply. I profile the weekly
charts for gold, crude oil, the euro and the Dow, the weekly charts for the housing and banking
indices, for the emerging markets and China 25 indices, and stress in the banking system
The yield on the 10-Year Note is below my semiannual pivot at 3.675, as risk aversion is trumping
supply. The 200-week simple moving average is key support at 4.01. Monthly resistance is 3.504.

Chart Courtesy of Thomson / Reuters


Comex gold shows the 200-week simple moving average as support at 822.3. Gold is nestled among
quarterly, annual and semiannual pivots at $1084.9, $1115.2, $1139.7 and $1186.5.

Chart Courtesy of Thomson / Reuters

Nymex crude oil has been trading around its 200-week simple moving average at $76.25, which has
been a pivot since mid-2009. A weekly close below my annual pivot at $77.07 signals reduced global
energy demand.

Chart Courtesy of Thomson / Reuters


The Euro is approaching its recent low at 1.3450 with the 200-week simple moving average as
resistance at 1.3883.

Chart Courtesy of Thomson / Reuters

The Dow is below my annual pivot at 10,379, but a close above today could signal strength to the
200-week simple moving average and annual resistance at 11,147 / 11,235. We need a close today
below 10,067 to sustain the monthly key reversal.

Chart Courtesy of Thomson / Reuters


The Housing Index (HGX) has been trying to bottom, but has been blocked in a trading range from the
March 2009 low of 55 / 54 and overhead resistance at 117 / 120. Note the top that I predicted at the
end of July 2005. The 200-week simple moving average is resistance at 148.33.

Chart Courtesy of Thomson / Reuters

The America’s Community Bankers Index (ABAQ) peaked at the end of 2006 and like the
homebuilders is trying to bottom. The March 2009 low was 122.75 and horizontal resistance is 160. If
that level is taken out the upside is to annual resistance at 195 with the 200-week simple moving
average at 223.55.

Chart Courtesy of Thomson / Reuters


The Regional Bankers Index (BKX) peaked in February 2007, and like the homebuilders and
community banks is trying to bottom. The March 2009 low was 17.75 and horizontal resistance is 50. If
that level is taken out the upside is to annual resistance at 73.12 with the 200-week simple moving
average at 77.86.

Chart Courtesy of Thomson / Reuters

The Emerging Markets Fund (EEM) shows that a close below the 200-week simple moving average
at 37.84 is negative. My annual pivot is 39.81 with annual resistance at 44.99.

Chart Courtesy of Thomson / Reuters


The China 25 Fund (FXI) shows that a close below the 200-week simple moving average at 38.89 is
negative. My annual pivot is 39.25 with annual resistance at 44.53.

Chart Courtesy of Thomson / Reuters

Tracking the Stress in the Banking System.

There are 380 publicly traded banks overexposed the C&D loans, and another 372 overexposed to
CRE loans only. That’s 752 publicly traded banks that are candidates for the ValuEngine List of
Problem Banks.

Looking at all 8,012 FDIC-Insured Financial Institutions we find 1,514 overexposed to C&D loans, and
another 1,312 overexposed to CRE loans only. That’s 2,896 banks or 36.1% of the 8,012 at risk of
failure.
When I dissect loans versus loan commitments, which I call Pipeline, even more banks are feeling
additional stress. A “normal” or “healthy” pipeline is when 60% of the C&D and CRE loans are
outstanding versus a bank’s total commitment to these types of loans. Of the 8,012 FDIC-Insured
Financial Institutions only 594 or just 7.4% have a pipeline between 55% and 65%. Most bank failures
have a pipeline above 80%, which is a sign of collection problems: 4,172 banks or 52% have this stress
characteristic. Of these, 1,406 have a pipeline that’s 100% funded, which is 17.5% of all banks.
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
ValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sample
issues of my research.

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