Housing, Regional Banks Lead SPX Lower

Housing and Community & Regional banks look weak. The S&P 500 is below its 200-day simple moving average.

The Housing Sector Index (HGX) is under downward pressure, as housing stimulus gets tweaked.

The daily chart for the HGX shows the index trending below its 21-day, 50-day and 200-day simple moving averages at 80.85, 85.39 and 83.93, and is trading at its lowest level since peaking at 99.47 on May 5^th.

Late last week the Obama administration tweaked the eligibility rules for mortgage resets under the Home Affordable Plan to 125% of loan to appraised value up from 105%.

Unfortunately, this will not help homeowners reduce monthly payments, as mortgage rates are higher.

Shifting to a 15 year mortgage from a 30 year at a lower rate won’t help either, as such results in a higher monthly payment. Where oh where is my Mortgage Mulligan Program?

If you don’t help housing, community banks will continue to fall like dominoes.

The America’s Community Bankers Index (ABAQ) is below its 21-day and 50-day simple moving averages at 139.94 and 144.21, and is also trading at its lowest level since peaking at 159.54 on May 8^th.

Last week the FDIC closed seven more small banks being the total failures for 2009 up to 52. Again the Achilles Heel is overexposures to C&D and CRE loans.

The regulatory guidelines for these loan categories have been violated for almost all bank failures.

Remember that our revered banking regulators are at fault as the US Treasury, Federal Reserve and FDIC ignored their own joint regulatory guidelines.

In my columns at RealMoney beginning in April 2006, I listed fifty banks that I said would fall like dominoes due to exposures to real estate loans. Let me know if you want to read my early works.

Several larger regional banks may have returned TARP money, but still are reluctant to lend.

The Regional Banking Index (BKX) is also below its 21-day and 50-day simple moving averages at 36.48 and 36.69. A break below 34.43 would be a new low since peaking at 43.77 on May 8^th.

One of the problems facing regional banks is the pinch in rising credit card defaults. As a result they have issued 38% few new cards in the last four months of 2008 versus the 2007 period.

In moving into my new community, Land O’ Lakes, Florida, I opened a new checking account at SunTrust (STI), the nearest major bank.

Of course they gave me a debit card, but they turned me down for a credit card, the first time I have ever been turned down for credit.

I guess they did not like all of the quires on those worthless credit scores, as I rearranged finances to buy the new home. My major banking business will stay with Wachovia seven miles away.

The daily chart for the S&P 500 and the 200-day simple moving average at 885!

As I have said since March 2007; “You can’t have a bull market for stocks with a bear market in financials”.

The S&P 500 shows declining momentum on its daily chart with Tuesday’s close below the 200-day simple moving average at 885. My quarterly support is 786.1 with weekly and annual pivots at 894.8 and 910.8.

Disclosure: No positions