Stress Tests: Round 2

See the link below for more information from the Wall Street Journal on the Fed's new round of stress testing for the banks.

http://online.wsj.com/article/SB10001424052748704648604575620732161392908.html?mod=WSJ_hp_LEFTTopStories

The main part of the article I read was:

“The Federal Reserve will require all 19 banks that underwent stress tests during the height of the financial crisis to undergo another review of their capital and their ability to absorb losses under an “adverse” economic scenario.

The Fed, in guidance issued today, said all 19 banks must submit capital plans by early next year showing their ability to absorb losses under a set of conditions to be determined by the central bank.

The request is part of the Fed’s effort to step up supervision at the nation’s largest financial firms.”

To me, the Fed is clearly seeing something that Wall Street does not.  I think they know the housing market is now rolling over again.  Ben Bernanke has implemented QE2 in case he needs to buy some mortgage backed securties to shore up the credit markets.  He wants to avoid a repeat of Q4 2008. 
That’s a good thing if you ask me.

LOOKING for a TOP!

Here we are in the middle of November and the equity markets are still hanging in overbought territory at just over 1200 on the S&P. We at Brotelli Investments continue to wait for confirmation of a top. We feel a strong break of 1200 will mean a correction has begun. Until then, we are watching the US Dollar index ($usd) to see if a bottom can form along with the commidity index ($crb) to see if a top is complete. Finally, we will be closely watching the housing index after the weak data we posted last week.

Until we see evidence of a top as stated above, the market will continue to rise as the bulls are in control.