Featuring Richard Suttmeier, Chief Market Strategist
Today I comment on US Treasury yields, Comex Gold, Nymex Crude Oil, an update on bank failures, President Obama’s Making Home Affordable Program, and tracking the S&P 500 Bear Market.
First of all let’s look at the weekly charts for the 10-Year yield, Comex gold and Nymex crude oil.
The yield for the 10-Year should trade range between 3.5% and 4%, as the rise in yield is overdone.
Increased supply is offsetting a potential flight to quality as the bear market returns for stocks. This week the US Treasury auctions $104 billion in new 2-Year, 5-Year and 7-Year notes.
For gold I show the 200-week simple moving average as long term support at $731 and the $1,000 ceiling, which has gapped gold since March 2008. My annual pivot should remain a magnet at $891.
Last week I predicted that crude oil would stay below its 200-week simple moving average at $74.54 and that oil would decline back into the zone of my annual pivots at $66.51 and $68.81 where it is today.
My Second focus is on bank failures, which now total 40 year to date.
Three more small private community banks were closed by the FDIC last Friday.
Like most this year’s failures Southern Community Bank in Fayetteville Georgia, Cooperative Bank in Wilmington North Carolina, and First National Bank of Anthony, Kansas were extremely overexposed to Construction & Development Loans and the nonfarm nonresidential loans.
These banks should have been warned at the end of 2006 when the US Treasury, Federal Reserve and the FDIC released their joint regulatory guidelines for these types of real estate loans. Again, our banking regulators have ignored this regulation throughout The Great Credit Crunch.
These three closures cost the Deposit Insurance Fund by $363.2 million. The 40 failures in 2009 cost the fund $12.2 billion leaving the balance down to a trickle of just $6.7 billion.
My third discussion is President Obama’s Making Home Affordable Program.
So far $18.3 billion to bailout mortgage servicers has been disbursed to 16 recipients. Heading the list is the ghost of Countrywide, Countrywide Home Loan, which received $5.2 billion. In second place is JP Morgan’s Chase Home Finance with $3.6 billion. In third place is Wells Fargo with $2.9 billion.
Isn’t it interesting that this program benefits the big four banks that are considered “too big to fail” a needed concept that our banking regulators want to get rid of. If you add in CitiMortgage and Bank of America the big four totals $13.6 billion or 74% of this bailout pie.
This program is the incentive payments for mortgage modifications according to Obama’s Making Home Affordable Program. When you consider that only 60,000 homeowners have been helped so far the 16 recipients have received an astounding payout of $305,000 per mortgage modification.
I received an email from someone trying to get his mortgage refinanced through Wells Fargo. He supplied all of information requested some 60 days ago. Last week he was told that Wells Fargo had three times as many foreclosures in May as they did in May a year ago, and that the bank does not have the staffing to look at his documents at this time. Wells is hiring outside consultants and they should be able to look at his case in another 60 days or so.
My fourth focus is the weekly and daily charts for the S&P 500 to show the status of the Bear Market.
The weekly chart for SPX shows overbought momentum and the failed test of the longer term down trend. A weekly close below my annual pivot at 910.8 is a warning.
The daily chart shows the 200-day at 900.80 with the 50-day at 898.73. The S&P 500 has been above its 50-day simple moving average since March 31st.
If you have any comments or questions send them to Rsuttmeier@Gmail.com.
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