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.

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and commentary can be found HERE.

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March 15, 2010 – Leaders and Laggards in the US Capital Markets

Treasury yields are range-bound, but with an upward bias. Comex gold and Nymex crude oil
tested resistances, while the euro stabilizes. The Dow lags its January high, while the NASDAQ,
Transports and Russell 2000 power to new cycle highs. The homebuilders rally in the face of
weak housing data, while community and regional bank stocks lead the rally ignoring the
increasing noncurrent loans in the banking system. Emerging markets are trying to catch up,
but remain the laggards’ year to date. Bank Failure Friday!
The yield on the 10-Year is cheaper than my semiannual pivot at 3.675, which is a sign that the
increasing sizes of the US Treasury auctions is trumping the risk aversion. In addition the coupon curve
is starting to flatten in anticipation that the FOMC may signal a change its wording on interest rates as
early as at the end of Wednesday’s FOMC meeting. Removing “extended period” will build a
consensus that raising rates may occur at the end of June.

Chart Courtesy of Thomson / Reuters

The re-inflating of the gold bubble keeps hitting a wall of resistance that extends from $1115.2 up
to $1195.4. Crude oil has a tough time getting back to its January high of $83.95. Meanwhile the euro
has stabilized above 1.34. Higher gasoline prices are a tax on consumers on Main Street and the cause
is commodity speculation non legitimate supply and demand. The euro rebound is short covering on
speculation that the dollar has bottomed.

Chart Courtesy of Thomson / Reuters

The NASDAQ, Dow Transports and Russell 2000 are at new 2010 highs, while the Dow Industrial
Average lags its January high of 10,730. The Dow is above my annual pivot at 10,379 with annual and
semiannual resistances at 11,235 and 11,442. These strong resistances are the reason why I predict
8,500 before 11,500 particularly with an extremely overbought daily chart. My call is supported by
having nine of eleven sectors overvalued according to ValuEngine.

Chart Courtesy of Thomson / Reuters

The Housing Sector Index (HGX) is below its September 2009 high, while the America’s Community
Bankers Index (ABAQ) and Regional Banking Index (BKX) are at new 52-week highs and are
extremely overbought being up 10.2% and 18.1% respectively year to date. These gains are not
justified by the Q4 FDIC Quarterly Banking Profile. Investors in this strategy are playing Russian
roulette with their investment dollars.

Chart Courtesy of Thomson / Reuters

Chart Courtesy of Thomson / Reuters

 Chart Courtesy of Thomson / Reuters

The Emerging Markets Index Fund (EEM) and the China 25 Fund (FXI) have rebounded but remain
down year-to-date by 0.3% and 2.4% respectively. The FXI has become extremely overbought.

Chart Courtesy of Thomson / Reuters

Bank Failure Friday started on Thursday. There were four failures bringing the total for 2010 to 30
banks closed in 2010. In 2008 there were just 25 bank failures. In 2009 there was another 140. The
total since “The Great Credit Crunch” that began at the end of 2007 is now 195, on the way to 150 to
200 this year and to 500 to 800 by the end of 2012 into 2013.
Most economists and strategist say that closing small banks is no big deal with little impact on the
economy and the markets. So far this year this “leaky faucet” in the US economy has cost the FDIC
Deposit Insurance Fund $4.9 billion with the DIF now underwater by $25.8 billion.
This is a big deal as small businesses are the engine of US economic growth. Most small businesses
do not want to borrow because of economic uncertainties. Those that want a loan can’t get one
because 4,172 banks or 52% of all FDIC-insured financial institutions have loaned more than 80% of
their loan commitments. Of these, 1,406 have a loan commitment pipeline that’s 100% funded, which is
17.5% of all banks. That’s too many “leaky faucets” that will eventually have to start to drain the FDIC’s
$500 billion line of credit with the US Treasury.
All four of last week’s bank failures were private banks extremely overexposed to C&D and CRE loans
with C&D to risk-based capital ratios between 243% and 520%, and CRE to risk based capital ratios
between 1226% and 6035% with pipelines of 82.5% to 97.6%. The ignored regulatory guidelines are
100% and 300% with a normal or healthy pipeline of 60%.
That’s today’s Four in Four. Have a great day.

Check out the latest Main Street versus Wall Street on Forex TV Live each day at
1:30 PM. The next broadcast is Monday, March 8, 2010.
http://www.forextv.com/Forex/custom/LiveVideo/Player.jsp
Richard Suttmeier
Chief Market Strategist
www.ValuEngine.com
(800) 381-5576
As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I
have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters as
well as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the
ValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sample
issues of my research.

“I Hold No Positions in the Stocks I Cover.”