Sunday, November 19, 2006

Housing Starts Collapse

Last Friday, seems like a long time ago, the market experienced options expiration for November and before the market opened we saw a very poor housing number.  October starts were down about 15% last month to a six year low, expectations were for about a 5% drop.  Here at the Update, we were not surprised by the number because after all it is the central tenet in our theory that the stock market will drop due to the housing market.  Still, with the housing dropping over the past year, the stock market has kept going up for whatever reason.  The fundamentals are still in place to hurt the stock market.

Anyway, the stock market did open down a bit on the news but did not seem to feel compelled to stay down.  The Dow put in its low within about 15 minutes and then ground higher all day to close out at another new record high.  The NASDAQ didn’t come out of negative territory but managed to close mostly even on the day.  The bond market had a good day but failed to best its Tuesday high.  Bonds have been the one bright spot in our portfolio the last few months but they have not been able to contain our losses in the stock market.  

We will see how this plays out over the next week as we go into the holiday season with Thanksgiving this week.  Black Friday should be given some attention by the market but the market doesn’t seem to be concerned with any kind of news, good or bad.  Speaking of news, the leading economic indicators will be announced on Monday and they will be ignored, too.

As we look out over the world markets this evening, the Asian market stands out.  The Japanese market is down over 250 points (1.5%) and the Hong Kong market is down about a half a percent.  In Australia, their market is down about 1.5%.  Our overnight futures are down a little but not much.

The market needs to show its hand again but we think it’s going to be a slow week.  That doesn’t mean it will and we plan to be here to analyze what is going on.

Dow Industrials:  12,342.56  +36.74
VIX: 10.05 (major complacency)
QQQQ:  44.30
RYVNX:   16.83
RYAIX:  21.38
RYCWX:  35.88
TLT:  89.95
BEGBX:  13.86

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