US Banks Stress Tests

Zero Hedge has an article about a ‘leaked report’ on the stress tests of the US banks.

The usual disclaimer applies. ‘Leaked report’ is not official.

However, a glance through the article highlights worrying ‘facts’.

1) Of the top nineteen (19) banks in the nation, sixteen (16) are already technically insolvent.

2) Of the 16 banks that are already technically insolvent, not even one can withstand any disruption of cash flow at all or any further deterioration in non-paying loans.

3) If any two of the 16 insolvent banks go under, they will totally wipe out all remaining FDIC insurance funding.

4) Of the top 19 banks in the nation, the top five (5) largest banks are under capitalized so dangerously, there is serious doubt about their ability to continue as ongoing businesses.

5) Five large U.S. banks have credit exposure related to their derivatives trading that exceeds their capital, with four in particular – JPMorgan Chase, Goldman Sachs, HSBC Bank America and Citibank – taking especially large risks.

Let’s wait for the offical report. 

Official or not, I am not optimistic about the banks financial statements. After all, with the change in the way assets are marked, they can choose to mark some of their dubious assets UP all the way like the ‘beanstalk’ that goes to the sky.


Chart Review of Citibank (C)

Citibank. Much as I am bearish about its prospect for a long time to come, I have to acknowledge that there are factors beyond me that has prevented this company from going down completely.

Rather than figuring out such issues, let’s just focus on the chart and see if there are areas where we can trade this counter.

The good news is with the good bank-bad bank announcement, C has rally a fair bit.

While the chart shows Tenkan sen crossing Kijun sen on 19 March, what follows suggests that this rally for C is running out of momentum in the short term. The first key reversal comes when it hits the weekly resistant level of 3.85; one that sees it closes at the opening price of the previous day.

More importantly, look the kumo resistant ahead. Thick kumo cloud suggests that resistant levels will be heavy with trend still showing downwards pressure.

From the Kijun sen, we can see that it is flattening out. This suggest that the price level will  most likely remain at this level. My suspicion is , it will trade between $2 and $2.60