The Best of the Worst

Perceived strength in the equities has delivered price gains and
brought the S&P through previous areas of resistance and back
above 900.00. The proof will be in the pudding to end the week as
two pivotal moments could threaten to shake the foundations. The
first of these – and the one of the most popular subjects of business
news this week – will be the results of the so-called stress tests for
banks. The results of the tests on nineteen banks are officially due
out on Thursday, but the news is already breaking from alleged
sources. A possible inside scoop from Bank of America suggests that
nearly a $34 billion dollar shortfall is likely. Scattered reports like this
have left some news outlets suggesting that anywhere up to fourteen
of the nineteen banks will be required to boost capital. This kind of
uncomfortable financial news could help bring another pullback in
prices as investors may shy away from another round of financial
insecurity and uncertainty.

Bank stress tests aside, the second event to watch for will be the
employment situation. Functioning almost like a consumer stress test,
it will be exceptionally important to confirm the status of things for
the average worker across the nation. Job cuts and lay-offs by US
companies appear exponentially higher than the same time last year
and difficulties facing the automobile industry have certainly not
helped to ease the situation. Even Bernanke’s comments yesterday
alluded to the possibility that losses and higher unemployment may

Past Performance is Not Indicative of Future Results.

continue for the time being before turning towards improvement
later this year. There are plenty of other enthusiastic forecasts which
hope for a return of confidence; however, the continuing record
breaking numbers of people on unemployment rolls and the overall
number of jobs shed since the onset of recession remind us that it is
just as likely Friday’s report will paint a bleak picture.

Overall, it appears that the dial remains set to cautiously optimistic
and while investors continue to sift through the economic news
rubble, every bit of shiny is up for grabs. The recent perceived
improvements in customer traffic from Starbucks and Disney as well
as the slight improvement in home sales and retail sales may provide
a life raft and throw some support under this market even if
Thursday and Friday’s economic news proves grim.

Past Performance is Not Indicative of Future Results.

Disclaimer: Futures and options trading involves substantial risk of loss and is not suitable for all investors. Past
performance is not indicative of future results. Copyright 2009 LaSalle Futures Group