Holding Dow 10,019 Is Critical This Week

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Includes: CSFL, DIA, DUG, FNSC, GLD, OZRK, TLT
by: Richard Suttmeier

The yield on the 10-Year is between my annual pivot at 2.999 and my annual risky level at 2.813 where the decline in yields failed once before. Gold ended last week below $1200 as strength last week failed just below my semiannual pivot at $1218.7. Crude oil could not sustain gains above my annual pivot at $77.05 last week. Monday’s pivot for the euro is 1.2896. My annual pivot at 10,379 for the Dow proved to be resistance last week, and a close below this week’s Dow pivot at 10,019 would be a sign of vulnerability.

10-Year Note – (2.941) Weekly and daily value levels are 3.013 and 3.091 with my annual pivot at 2.999 and annual risky level at 2.813. Semiannual and quarterly value levels are 3.479 and 3.486 with quarterly and semiannual risky levels at 2.495 and 2.249. The low yield for the move was 2.879 set on July 1st, and was a failed test of my 2.999 and 2.813 annual risky levels.

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Comex Gold – ($1192.9) My quarterly and annual value levels are $1140.9 and $1115.2 with daily and semiannual pivots at $1211.6 and $1218.7, and semiannual, weekly and monthly risky levels at $1260.8, $1264.3 and $1279.3. The all time high of $1266.5 set on June 21st was a test of June’s monthly resistance, as a significant top for gold.

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Nymex Crude Oil ($75.90) Still influenced by my annual pivot at $77.05 with monthly, daily and weekly risky levels at $79.36, $79.72 and $79.87. My quarterly value level is $56.63 with semiannual risky level at $83.94.

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The Euro – (1.2925) My weekly value level is 1.2366 with a daily pivot at 1.2896, and the 200-day simple moving average at 1.3682. Monthly and quarterly value levels are 1.2035 and 1.1424 with semiannual risky level at 1.4733.

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Daily Dow: (10,098) This week’s pivot is 10,019 with my annual pivot at 10,379, and semiannual, daily and monthly risky levels at 10,558, 10669 and 10,891. My quarterly value level is 7,812 with my annual risky level at 11,235, which was tested at the April 26th high at 11,258. This test marked the end of the bear market rally that began in March 2009. We are in the second leg of the multi-year bear market that began in October 2007 targeting 8,500 before 11,500.

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Bank Failure Friday – The FDIC closed six banks last Friday bringing the total for the month of July to ten and 96 for the year. Month to date bank failures have drained the FDIC Deposit Insurance fund by $494.7 million bringing the year to date today to $18.1 billion, well above the $15.33 billion prepaid assessments for all of 2010. I estimate that the DIF is now in arrears by $32.3 billion.

  • 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, in the second quarter there were 45 failures, and so far 10 for the third quarter for a year to date total of 96.

  • At this pace bank closures in 2010 will be within my 150 to 200 estimate range for 2010.

  • Since the end of 2007, the FDIC has closed 261 banks on the way to my predicted 500 to 800 by the end of 2012 into 2013.

Two of the six bank failures last Friday were publicly-traded and both were on my List of Problem Banks. All for banks including First National Bank of the South (FNSC) and MainStreet Savings Bank (MSFN) had overexposures to C&D and / or CRE loans with loan pipelines that were 94.3% to 100% funded.

The FDIC used two publicly-traded banks as the consolidators of assets that are also overexposed to C&D and CRE loans.

Bank of the Ozarks (NASDAQ:OZRK) ($35.79) has a C&D risk ratio of 183.2% and a CRE risk ratio of 395.2% versus the regulatory guidelines of 100% and 300% of risk based capital. OZRK has a real estate loan pipeline that’s 82.2% funded. My quarterly value level is $30.03 with a weekly pivot at $35.98 and monthly risky level at $43.05.

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CenterState Bank off Florida (NASDAQ:CSFL) ($9.32) has a C&D risk ratio of 63.2% and a CRE risk ratio of 319.2% versus the regulatory guidelines of 100% and 300% of risk-based capital. There with the guideline for C&D and just over the guideline for CRE, so the FDIC found a Florida bank that’s “less bad.” CSFL has a real estate loan pipeline that’s 77.4% funded, which illustrates some collection issues. My semiannual value level is $5.46 with a weekly pivot at $9.69 and quarterly risky level at $12.01.

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That’s today’s Four in Four. Have a great day.

Disclosure: I hold no positions in the stocks I cover