Stress Methodology

The 19 companies that hold one-half of the loans in the U.S. banking system won't be allowed to fail -- even if they fared poorly on the stress tests.
The Federal Reserve on Friday said the government is prepared to rescue any of the banks that underwent "stress tests" and were deemed vulnerable if the recession worsened sharply.
The Fed reinforced its view that major financial firms are "too big to fail," and the government must do The federal examiners—eventually comprising a team of more than 150 from the Federal Reserve, the Office of the Comptroller of the Currency, and the Federal Deposit Insurance Corp.—have been working since late February on the analysis of bank holding companies with more than $100 billion in assets at the end of 2008. The banks collectively hold two-thirds of the assets, or more than half the loans, in the U.S. banking system, according to the Federal Reserve. whatever is necessary to save them, said former Fed examiner Mark Williams.

The analysis looked at the banks' ability to withstand two economic scenarios: one mirroring the consensus of economic experts on the course of the downturn through 2010 and the second modeling a worse-than-expected course of economic activity.
The Federal Reserve, in its Apr. 24 white paper on the methodology behind the stress test>, noted that "the assessment is a 'what if' exercise intended to help supervisors gauge the extent of additional capital needs across a wide range of potential economic outcomes." The central bank noted that the need for more capital "is not a measure of the current solvency or viability of the firm."
Among the factors considered in the stress test scenarios were gross domestic product, the unemployment rate, and the direction of housing prices. The stress tests measure how the banks will perform if unemployment rises to between 8.8% and 10.3% in 2010; the economy grows by 2.1% and 0.5%; and home prices drop by 4% to 7%. To determine a bank's capital needs, regulators looked at a host of different measures, including Tier 1 capital.
Tracking the Dow on Friday,24/04/09.


9:30am:-a 70.0 points bull spike.
Durable goods orders slipped in March, but fell far less than Wall Street expected.
10:30am:-no sign of gap-up refill.
Bullish candle.Sales of new single-family homes dropped, but inventories plummeted at a record pace.
11:30am:--Session high breakout.
American Express shooting up nearly 21 percent to $25.30 a day after reporting results that topped analysts' expectations, helped by aggressive cost cutting.
12:30noon:--Still holding at session high but with hangman.
Somehow or rather must pullback to MAV at this hour.Ford Motor Co also posted a smaller-than-expected first-quarter loss and said it was on track to at least break even in 2011 and did not expect to seek U.S. government loans, sending its shares up 11.4 percent to $5.
1:30pm:--Bearish hammer,sign of pullback to MAV.
Software giant Microsoft Corp provided the biggest boost to the Nasdaq, up 10.5 percent at $20.91, after investors cheered cost-cutting efforts.
2:30pm:--The bullish engulfing after completing the MAV.
Shares of online retail giant Amazon.com, up 4.8 percent at $84.46, gave another lift to the Nasdaq after beating profit and sales estimates.
3:30pm:--Hammer and bearish top spin.
The Federal Reserve said the top 19 U.S. banks need to hold a "substantial" amount of capital above regulatory requirements to weather a potential worsening of the economic recession, according to the Fed's white paper on bank stress tests.
4:00pm:--A nearly 80.0 points dive.
A fake last minute bull.We are in for another hefty pullback follow through.

Friday's inverted hammer fall short of penetrating Monday's full body.
Any pullback will be within the half naked body.
We are in the bullish zone.