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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 19, 2010 Community and Regional Banks Take a Hit

Homeowners Bailing Out of Mortgage Aid! The FHA Shares in the Housing Mess. Communityand Regional Banks Take a Hit. Risk Aversion returned as the Germans ban naked short salesand certain CDO trading.

Homeowners Bailing Out of Mortgage Aid - So far I would have to say that the governmentsmortgage modification programs cannot be considered successful. It seems that 25% of the 1.2 millionhomeowners who were offered mortgage help dropped out of the program. Those weeded out of theprogram risk being worse off than if they did not apply for the program in the first place. If they simplywalked away that would still have their savings and would eventually have a fresh start in a moreaffordable home.

The FHA Shares in the Housing Mess - The Federal Housing Administration insures home mortgageand does so after giving homeowners a very low down payment of 3.5%. In 2006 the FHA insured just

3% of home mortgages, but today is 33%. Together with Fannie Mae and Freddie Mac the FHA thesegovernment agencies are at risk for nearly the entire $11 trillion US mortgage market.

Private mortgage lenders are not a factor in todays mortgage market as they require 10% to 20% downpayments versus the 3.5% for the FHA guarantee. The FHA is now under considerable financial stressas defaults have skyrocketed. As a result the FHA has tightened credit standards including a 10% downpayment for borrowers with low credit scores. At the end of February, the "seriously delinquent" rate forFHA-insured mortgages spiked to 7.5% up from 6.2% year over year. It seems that problems at theFHA plus Fannie and Freddie are the seeds for another mortgage meltdown extending TheGreat Credit Crunch and the Nightmare on Main Street.

The Americas Community Bankers Index (ABAQ) tried to trend above its 21-day simple moving

average at $176.53 last Wednesday and todays close is below its 50-day simple moving average at$171.64. My monthly support at $165.51 is the key level to hold.

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Courtesy of Thomson / Reuters

The Regional Banking Index (BKX), which tracks the too big to fail names also tried to trend aboveits 21-day simple moving average at $55.64 last Wednesday and Fridays close was below the 50-daysimple moving average at $53.84. My monthly support at $49.20 is just below the Flash Crash low of

$49.94 with the 200-day simple moving average at $47.50.

Courtesy of Thomson / Reuters

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Risk Aversion returned as the Germans ban naked short sales and certain CDO trading.

10-Year Note The daily chart shows how the 200-day simple moving average at 3.579 has become

the risk aversion support. My quarterly pivot is 3.467 with the May 6th low yield at 3.226. Supply testcomes next week with $113 billion in 2-Year, 5-Year and 7-Year note auctions.

Courtesy of Thomson / Reuters

Comex Gold has become currency of last resort primarily on euro weakness, but profit-taking isalleviating an overbought condition. My semiannual support is $1186.5 with my monthly resistance at$1270.1.

Courtesy of Thomson / Reuters

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Nymex Crude Oil has been declining as a challenge to the global growth story, and is now extremelyoversold. Quarterly support is $58.41 with my annual pivot at $77.05. A month ago Wall Street wastouting $100 oil!

Courtesy of Thomson / Reuters

The Euro has become extremely oversold and trading below my quarterly pivot is 1.2450.

Courtesy of Thomson / Reuters

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Daily Dow:Theres an up trend resistance line that connects highs going back to November 2009 thatwas tested at the April 26th high. The daily chart profile is neutral with the Dow below its 21-daysimple 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 thatthe April 26th high at 11,258 ends the bear market rally since March 2009.

Courtesy of Thomson / Reuters

Thats todays Four in Four. Have a great day.

Richard SuttmeierChief 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.