1. Markets are poised to pause the downmove for 24-48h before the move resumes with our short term target of 1250 for the SPX which is by Fibonnacci and pattern a target and happens to be the 200 MA as well. The biggest losers were banks so far in the correction – which is fully deserved as their profit are fairy tales and part of them were pure FED produced free rides on the back of taxpayers losses ( like Goldman getting a creditline of 30 Bil at a rate of 0.01% – well I take any size of credit at 0.01 percent since you make easily a return of 4-5 percent very conservatively , that gives one a profit of 1.5 bil – just to give you an idea how Wallstreet make ‘profits’).
So far the shorts are running well and we have not reached a capitulation level hence we keep selling rallies and trade from the short side. SPX could very likely test the 1300 level and should turn south again around that level tomorrow of Thursday. Below an excerpt why banks are in deep trouble – first of all the reason why this depression started is still intact, they sit on this rotting mortgage loans whose underlying value keeps dropping to new lows. The other is the outrunning QE2 which gave them ‘easy’ profits from the FED expiring and since it did not help anyone but the banks they can not just take QE3 up anytime soon.
66% Of Las Vegas Mortgages Are Underwater, 27.7% Of Total US Housing Debt Has Negative And Near-Negative Equity
Submitted by Tyler Durden on 06/07/2011 09:33 -0400
Following yesterday’s news out of Zillow of a 0.77% drop in April home values compared to March, today we get an update from CoreLogic which in turn looks at the latest trends on “underwater” (or negative equity) mortgages in the US. In summary: “10.9 million, or 22.7 percent, of all residential properties with a mortgage were in negative equity at the end of the first quarter of 2011, down slightly from 11.1 million, or 23.1 percent, in the fourth quarter. An additional 2.4 million borrowers had less than five percent equity, referred to as near-negative equity, in the first quarter. Together, negative equity and near-negative equity mortgages accounted for 27.7 percent of all residential properties with a mortgage nationwide. In the fourth quarter, these two categories stood at 27.9 percent.” The most impacted state is Nevada, which has 62.6% of all mortgages underwater (with another 4.8% in near-negative), followed by Arizona, Florida and Michigan. California is fifth with 30.9% of all homes underwater. We doubt these millions of “homeowners” are benefiting much from the wealth effect.