Markets are waiting for the stress test on banks which are due on Thursday i.e May 5th. According to the one of the leaked report from tuner radio network (http://turnerradionetwork.blogspot.com/2009/04/leaked-bank-stress-test-reults.html), which shows that technically 3 are solvent out 19 what does that suggests us more down side in the recent rally in the financial as they are leaders for the broader markets.But what does the banking index gives us the clues as we are technically at the resistance level and due for correction for another consolidation or further down the toilets. Definitely banks are caught with the swine flu and Dr. Barnanke had to quarantine before they can function properly. Its wait and watch game going on for the last couple of weeks and they don't know how to release this mess.
Another major down side move would be in banks and on housing cycles when the ARM's reset which are due this summer would fail around 8 millions homes according to the credit suisse. Here's is the chart which not only shows that subprime is small part when compared to option ARM's.
Click for larger pic.
Source: Credit Suisse.
Watching closely JPM which is one of the respected banks on wall street with least exposure to sub prime but does have 2nd order derviates on thier sheets which will bring down this giant bank, but at wat levels ? I feel that breaking below the 2009 lows will definitely have the domino effect on the banking index as well as the entire markets. So watch closely JPm, If this crashes then entire markets are due for crash.
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