Risk Aversion stalls on improved Housing data and euro

8/9/2019 Risk Aversion stalls on improved Housing data and euro

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Richard Suttmeier is the Chief Market Strategist at www.ValuEngine.com.ValuEngine is a fundamentally-based quant research firm in Princeton, NJ. ValuEngine

covers over 5,000 stocks every day.

A variety of newsletters and portfolios containing Suttmeier's detailed research, stock picks,and commentary can be found HERE.

May 18, 2010 Risk Aversion stalls on improved Housing data and euro

Improved NAHB Housing Market Index, but the reading remains depressed. TARP DividendPayments were due on Monday, May 17th. Risk Aversion continues but was giggled by a eurorebound.

The National Association of Home Builders Housing Market Index increased three points in May to22, but the index needs to be above 50 to be considered a game changer. The reading is the highestsince August 2007, but the homebuyer tax credits expired at the end of April so sustaining thisimproving trend will be difficult in the months ahead.

As you might expect homebuilders experienced a trading bounce on the better than expected NAHBdata, but it was subdued as shown by the daily chart of the Housing Sector Index (HGX). HGX istrending below its 50-day simple moving average at $116.34 with risk to the 200-day simple movingaverage at $106.37. My monthly value level is at $105.96.


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Courtesy of Thomson / Reuters

The US Treasury reported that mortgage modifications rose 68,000 last month to near 300,000 out ofthe estimated 3.275 million who are deemed eligible for help from the HAMP. This growth was 13%sequentially in April, but the Treasury report also cited that there were 3,700 re-defaults.

Three months ago 74 FDIC-insured financial institutions deferred their TARP dividendpayments. SNL Financial reports that Saigon National Bank (SAGN) will miss its sixth TARP dividendpayment, which gives the US Treasury the right to elect two directors to this banks board. The rub isthat the banks regulator the Office of the Comptroller of the Currency (OCC) is blocking the paymentciting a shortfall in capital. SNL compiled a list of the TARP recipients that are nearing the threshold ofmissing six TARP dividend payments.


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Monday was the day when current TARP recipients were supposed to pay their dividend payments tothe US Treasury. Three months ago 74 TARP banks reneged on making their dividend payments.According to Probublica.org there remains $204.9 billion in TARP outstanding loaned to 706 recipients.

Eleven of the thirteen banks on the above list are publicly traded and on the ValuEngine List of ProblemBanks. Midwest Banc Holdings (MBHI) was one of the banks that were closed by the FDIC lastFriday.

The problem the way I have described the TARP give-away to small banks was that those overexposedto C&D and CRE loans should have been turned down when they requested TARP. These were nothealthy banks and this is being proved the case when state and other regulators are telling many ofthe TARP banks do not make your TARP dividends as your capital is too low.

According to TARP guidelines the US Treasury has the authority to appoint two board directors if abank misses six dividend payments. The question is, will they do so?

10-Year Note The daily chart shows how the 200-day simple moving average at 3.580 has becomethe risk aversion support. My semiannual, weekly and monthly supports are 3.675, 3.683 and 3.735with my quarterly pivot at 3.467, and the May 6th low yield at 3.226. On Thursday the US Treasuryannounces $113 billion in 2-Year, 5-Year and 7-Year notes for auction next week.


Comex Gold has become currency of last resort primarily on euro weakness. My semiannual supportis $1186.5 with my monthly resistance at $1270.1. Gold is topping out as the euro alleviates onoversold condition.


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Nymex Crude Oil has become extremely oversold with nearby support at $68.75 and the 200-daysimple moving average at $76.66. A Memorial Day bounce with Hurricane Season beginning on

June 1

st

could result in a short-covering rally.



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The Euro became extremely oversold and after trading below 1.23 on Monday, holding that leveltargets my quarterly pivot at 1.2450.


Daily Dow:As long as MOJO is rising the trading range set since the Flash Crash should remain intact. The daily chart profile is neutral with the Dow below its 21-day simple moving average at

10,924. The Dow is below its 50-day simple moving average at 10,875 with the 200-day simple movingaverage as support at 10,241. It seems that the April 26th high at 11,258 ends the bear market rallysince March 2009. My call remains, Dow 8,500 Before Dow 11,500.



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Thats todays Four in Four. Have a great day.

Richard Suttmeier

Chief Market Strategistwww.ValuEngine.com(800) 381-5576

As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. Ihave daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters aswell as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as theValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sampleissues of my research.

I Hold No Positions in the Stocks I Cover.

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Risk Aversion stalls on improved Housing data and euro