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September 20, 2010 – Risk Aversion versus the Stock Market Rally
The risk aversion trading range for the 10-Year US Treasury yield is between my annual pivot at
2.813 and my monthly risky level at 2.562. Higher gold prices are another risk aversion sign,
but this week’s pivot is $1283.5 versus the all time high set this morning at $1284.9. Lower
crude oil prices is a negative divergence for the economy as attempts to trend above my
annual pivot at $77.05 keep on failing. The strong euro is the positive wild card for stocks as
the euro continues to track between its 50-day simple moving average at 1.2886 and its 200-day
at 1.3233. The Dow is extremely overbought on its daily chart but that will continue as long as
closes are above my semiannual pivot at 10,558. If a monthly risky level does not form for
October, then the Dow can re-test my annual risky level at 11,235 by Election Day as the market
factors in a Republican House of Representatives. Bank Failure Friday closes six banks.
10-Year Note – (2.739) Annual, daily and annual value levels are 2.813, 2.852 and 2.999 with monthly,
quarterly, weekly and semiannual risky levels at 2.562, 2.495, 2.487 and 2.249.
Nymex Crude Oil – ($73.61) Weekly and quarterly value levels are $72.72 and $56.63 with a monthly
pivot at $74.45, and daily and annual pivots at $76.55 and $77.05, and semiannual risky level at
$83.94.
Daily Dow: (10,608) Weekly, annual, monthly and quarterly value levels are 10,445, 10,379, 10,164
and 7,812 with my semiannual pivot at 10,558, and daily and annual risky levels at 10,708 and 11,235.
My annual risky level at 11,235 was tested at the April 26th high of 11,258.01. The Dow has
become extremely overbought.
Bank Failure Friday was busy for the FDIC as six community banks were shuddered. The total
number of failures for 2010 is now up to 125 on the way to 150 to 200. The third quarter now totals 39
with two more weeks to go. The FDIC Deposit Insurance fund has now been drained by $2.28 billion in
the third quarter, which brings the negative DIF balance to $17.5 billion. The FDIC has already burned
through the assessments for 2010. The assessments for 2011 and 2012 have been pre-paid at $15.33
billion per week.
During “The Great Credit Crunch” the FDIC only closed 25 banks during all of 2008. In 2009 the FDIC
picked up the pace with 140 bank failures with a peak of 50 in the third quarter of 2009. So far in 2010
the FDIC closed 41 banks in the first quarter, another 45 in the second quarter, and so far 39 for the
third quarter. With 118 bank failures so far in 2010 the total for “The Great Credit Crunch” is up to 290
continuing its path to my predicted 500 to 800 by the end of 2012 into 2013.
The only publicly traded bank closed on Friday was First Commerce Community Bank (FCGA)
which is on the ValuEngine List of Problem Banks. FCGA had overexposures to C&D loans at 532% of
risk-based capital and CRE loans at 1800% of risk-based capital. This is versus the ignored regulatory
guidelines of 100% and 300% respectively. FCGA had a real estate loan pipeline that was 98%
funded.
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
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As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com.
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