The Commerce Department announced that housing starts for May rose 5%. That’s a very interesting number since it is up. We have to admit we are a little surprised by these government statistics. Maybe you can help explain this. There was some speculation on the issue in today’s media reports that said since prices have not fallen “much” that homebuilders are continuing to build???
As for the market, it seemed to think the housing numbers were ok but for some reason there was a bit of a down draft during midday. Early in the day the Dow was up about 80 points but went out only 32 points higher. Breadth was negative and the market seems to still be oversold according to our momentum indicators. What does this mean?
The market has dropped considerably over the past couple of months and now is trying to find a way to rally. Each rally is still met with selling and there is no follow through. This is a chilling reality. The Fed has been jawboning heavily and the markets have responded with some selling but with next week’s meeting sitting out there, the market should be getting ready for good news from the Fed. Just the opposite is true because now we are starting to hear that the Fed may have to go up another full point to six percent. We find this to be an over reaction but it was out there in the news on Tuesday.
As for us, we are concerned that the market has not managed to bounce better off the lows and that the momentum indicators are weak. We have said numerous times that the time a market gets oversold, a panic sell is possible. There doesn’t seem to be very much concern in the market so we urge you to…
Be careful out there.
Dow Industrials: 10,974.84 +32.73