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Beige Book Shows the Great Credit Crunch Continues


Loan demand is weaker; loan quality is deteriorating.

Editor's Note: This article was written by Richard Suttmeier, chief market strategist at, which is a fundamentally-based quant research firm in Princeton, New Jersey, that covers more than 5,000 stocks every day.

I consider the Beige Book as the Gossip Columns from the 12 Federal Reserve Districts. Let's look at some of the anecdotes from comments presented.

Overall there's an anemic attempt at improving economic conditions including consumer spending for general merchandise and vehicles, including used cars. Manufacturing is said to be steady to moderately improving. Even residential real estate conditions were improved, but from very low levels.

Home prices were described as flat or declining modestly, but home construction continued to be weak. A key negative is the statement that commercial real estate and related construction was depicted as very weak and in many cases deteriorating.

"The Great Credit Crunch" continues with weaker loan demand and tight credit standards with steady or deteriorating loan quality.

Labor conditions remained weak with some scattered signs of improvement. There were no comments with regard to "shovel-ready" projects or jobs saved or created by President Obama's huge stimulus spending. In fact the Beige Book stated that labor-market conditions remained weak with further layoffs, sluggish hiring, and high levels of unemployment in most districts.

Some districts reported upward pressure on commodity prices, but these aren't being passed on to consumers.

The headline from the Associated Press read, "Fed survey finds recovery gaining momentum." I'd like to know what version of the Beige Book they read!

The Dow remains positive but overbought on its weekly chart with a daily pivot at 10,490 today. Ascending wedge resistance is 10,612 with down trend resistance at 10,581, and monthly resistance at 11,035. (Charts courtesy of Thomson / Reuters.)

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We need to see a clear catalyst for a breakout above 10,600 to signal an end to the multi-year bear market, and strength to monthly and semiannual resistances at 11,035 and 11,508. This wouldn't be a new bull market, but a continuation of dollar carry trade and the formation of a stock-market bubble. (AMZN) is rated a BUY according to ValuEngine, but it's more of a MOJO Play.

At a new all-time high of 142.67, Amazon is 44% overvalued with overbought MOJO on its daily chart. The stock is up 242% over the past 12 months and has a PE ratio of 56.6. This is a retailer with an upside of just 3% over the next 12 months.

If you're a MOJO Trader, have a sell stop below my monthly pivot at $125.03 and consider booking profits on strength to my weekly risky level at $150.29.

Comex Gold reached another new all-time high at $1227.5 this morning as the parabolic bubble continues to inflate. My weekly pivot is $1200.4. When a market goes parabolic, you don't know how high it can go. I warned about this potential when the down trend shown was broken to the upside.

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Nymex Crude Oil has seen lower weekly highs for the past seven weeks with the 200-week simple moving average as support at $75.64 and the high for the move at $82.00. Supply is flooding the market, as the recession reduces demand on Main Street, USA.

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