The stock market got off to a brisk opening at least until the housing data was released. Then the market did an unexpected thing, it went down, which, of course, given our positions we like but... The housing stat we are speaking of is the existing home sales which were reported to be down 4.1% on expectations of a decline of 1.2%.
We are especially interested in these numbers as they are the basis of our bearish position in the stock market. We just don’t think the numbers are really as Good as they say they are. One number that we question is the year over year price change in the median sales price of existing homes. That number went up 0.9% and we are scratching our heads on this one. Are all the Good houses being purchased at higher prices??? Even though there were about 11.2% fewer sales this past month compared to last year at this time, people were still paying higher prices for the ones that were purchased??? We don’t really understand how this can be. Inventories of unsold homes in the nation rose 3.2% to a record 3.85 million, a 7.3 month supply at the July rate of sales.
The Wall Street Journal (WSJ) had a front page article concerning the housing market. The article appeared in Wednesday’s edition and it is a must read. The article has bits and pieces of several stories related to the housing situation that track right with our thinking process. You may not remember that we mentioned last year about this time that the housing market had probably peaked in the summer of 2005. We see that time frame discussed in the article, looking backwards after the Fact. We told you last year as it was happening—once in a while we can be right on the money. Anyway, the article has something for everybody and we recommend a quick read.
In “normal’ times, meaning the last little while, any weakness in the economic indicators would remind traders that the Fed won’t have to raise rates again. This type of thinking leads to the next logical place of buying stocks. Instead, the stock market went down and the bond market went down. Think of it, traders were thinking rationally for a change except that why did they think that way on Wednesday? We can’t answer that. I know you come to this blog to get insight into some of the goings on in the market so we apologize for our lack of answers on this topic.
We do think that if the market wants to go down at this time, there will be no shortage of sellers and there will be no question whether the market is going down or not. So, we have been prepared for this in our trading.
[Remember there will be no posting tomorrow and our next posting will be Sunday evening for your reading pleasure on Monday morning. See you back here then. Have a good weekend.]
Dow Industrials: 11,297.90 -41.94
QQQQ: 38.14
RYVNX: 22.26
RYAIX: 24.43
RYCWX: 42.04
TLT: 87.15
BEGBX: 13.69
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