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Risk aversion continues with stubbornly low US Treasury yields, Gold nearing $1250, Crude Oil sliding with the euro, and a new bear market for stocks that has only just begun. Bank Failure Friday shuts four, two were on the ValuEngine List of problem banks, and one of those received TARP and reneged on Dividend Payments. What I have been saying continues to be confirmed by the Congressional Oversight Panel.
10-Year Note – The daily chart (click to enlarge) shows how the 200-day simple moving average at 3.581 has become the risk aversion support. My semiannual, weekly and monthly supports are 3.675, 3.683 and 3.735 with my quarterly pivot at 3.467, and the May 6th low yield at 3.226. On Thursday the US Treasury announces $113 billion in 2-Year, 5-Year and 7-Year notes for auction next week.
Courtesy of Thomson / Reuters
Comex Gold – has become currency of last resort primarily on euro weakness. My semiannual support is $1186.5 with my monthly resistance at $1270.1. (click to enlarge)
Courtesy of Thomson / Reuters
Nymex Crude Oil has been declining as a challenge to the global growth story. Quarterly support is $58.41 with my annual, weekly and monthly resistances at $77.05, $80.06 and $88.53. (click to enlarge)
Courtesy of Thomson / Reuters
The Euro – Daily support is 1.2224 with the November 2008 low of 1.2323 (failed to hold overnight), my quarterly pivot is 1.2450, and weekly resistance at 1.2711. Monthly resistance is 1.3773. (click to enlarge)
Courtesy of Thomson / Reuters
Dow Tracks – Daily & Weekly Chart
Daily Dow: There’s an up-trend resistance line that connects highs going back to November 2009 that was tested at the April 26th high. The daily chart profile is neutral with the Dow below its 21-day simple moving average at 10,942, but with rising MOJO. The Dow is below its 50-day simple moving average at 10,874 with the 200-day simple moving average as support at 10,234. It seems that the April 26th high at 11,258 ends the bear market rally since March 2009. (click to enlarge)
Courtesy of Thomson / Reuters
Weekly Dow: The Dow ended last week below its 200-week simple moving average at 11,130, after testing the 61.8% Fibonacci Retracement of the October 2007 to March 2009 low at 11,246 at the April 26th high at 11,258. MOJO is declining with last Friday’s close below the 5-week modified moving average at 10,747, so the weekly chart is negative. I predict Dow 8,500 before Dow 11,500. (click to enlarge)
Courtesy of Thomson / Reuters
Here’s a Score Card for the major averages
  • The Dow saw a high of 10,880 at the May 6th high. On May 13th the Dow exceeded that high trading at 10,920. The Dow stayed below all of my resistances.
  • The S&P 500 retested its May 6th high at 1168, but on May 13th failed at its 50-day simple moving average at 1173.57. I viewed this as a significant failure.
  • The NASDAQ retested its May 6th high at 2408, and exceeded its 50-day simple moving average at 2417. The NASDAQ stayed shy of its monthly resistance at 2499
  • Dow Transports is the upside leader trading well above its May 6th high of 4580. The May 12th high of 4667 was shy of my annual resistance at 4955.
  • The Russell 2000 is also above its May 6th high of 700.89. On May 13th the high was 719.70 versus semiannual and annual resistances at 717.69, 723.54 and 748.99.
  • The SOX is also above its May 6th high of 368.35 and traded above its 50-day simple moving average at 371.62. On May 13th the SOX tested 376.42 versus monthly resistance at 375.14.
Bank Failure Friday – Four banks were closed by the FDIC on Friday. While these were small banks, the cost to the Deposit Insurance Fund is now $9.9 billion in the second quarter and $16.4 billion year to date, which exceeds the total bank assessments of $15.33 billion for 2010.
  • New Liberty Bank (PFNL) was on the ValuEngine List of Problem Banks.
  • Midwest Bank & Trust (MBHI) was not only on the ValuEngine List of Problem Banks, but the bank received TARP and reneged on its Dividend Payments. Another one of my offbeat predictions have now become reality.
  • Only 25 banks failed in 2008, as the FDIC was slow closing community and regional banks.
  • There were 140 bank failures in 2009 with a peak of 50 in the third quarter.
  • In the first quarter of 2010 there were 41 failures, and so for in Q2 the total is 31 for a year to date total of 68.
  • At this pace, bank closures in 2010 will be at the high end of my 150 to 200 estimate.
  • Since the end of 2007, the FDIC has closed 236 banks.
All four of Friday’s bank failures were overexposed to C&D and CRE loans.
· Three of four banks were overexposes to C&D loans were between 135.7% and 475.1%.
· All four had overexposures to CRE loans were between 268.8% and 1036.9%.
· The loan pipelines were 80.3% to 98.3% of loan commitments funded.
· The ignored regulatory guidelines are 100% for C&D loans and 300% for CRE loans.
The Congressional Oversight Panel sees little evidence that TARP spurred small business lending. During “The Great Credit Crunch” loans to small businesses fell by 9% between 2008 and 2009, and since 36% of all community banks are overexposed to Commercial Real Estate loans and about 50% have 80% of their loan commitments outstanding their ability to lend is constrained.
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Source: Risk Aversion Continues; Four More Banks Fail