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Stock Market At Very Interesting Juncture…

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    July 19, 2012

    May 1st was a key date for the market this year, as it was last year.

    Could July 22 also be a key date again this year?

    There are some similarities, including a summer rally that has the market in another triangle formation. The direction of the breakout from such a formation frequently determines the direction for a while.

    This is also an options expirations week and the market tends to be positive into Friday’s expirations. But it tends to then be down the week after the July expirations (about 70% of the time).


    If the housing market has bottomed it could be big!

    After being down Monday, the market bounced back Tuesday and yesterday, apparently in reaction to the positive economic reports from the housing industry. On Tuesday it was the Housing Market Index, which showed a considerable improvement in the sentiment of the nation’s homebuilders. The reason for that improved sentiment could be seen in yesterday’s report that new housing starts jumped 6.9% in June.

    I’m impressed since, as I’ve said throughout the recovery from the Great Recession, a sustained recovery cannot take hold until the housing industry bottoms and begins to recover.

    Housing and autos have always been the two major drivers of the economy due to their widespread impact on the other industries that supply them and feed off them.

    Watching employment numbers is fine, but I still contend that jobs are a lagging indicator. Employers do not need to add new jobs until the economy is recovering and their businesses are expanding in a sustained way as a result.

    Yesterday’s report was that new housing starts were up 6.9% in June, the fourth straight month of improvement. But don’t get too excited. At an annualized pace of 760,000 starts it’s still only half of the 1.5 million annual pace economists consider to be normal and able to have a normal impact on the overall economy.

    It’s estimated that a pace of 1.5 million new starts annually would add 50,000 jobs to the monthly jobs report. At 760,000 starts we’re not near that kind of impact. In fact, IHS Global Insight, a consulting firm, cautions that they don’t see starts reaching 1.5 million until 2015 and only if the economy doesn’t run into another setback.

    But still, the reports are a big improvement over what has been the norm in the last five years or so of housing being in a deep depression.

    New homes represent about 20% of total home sales. So it will be interesting to see this morning’s report of existing home sales, which will be released at 10 a.m. I’m expecting a positive report there also.

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    Images: Flickr (licence attribution)

    About The Author

    Sy Harding publishes the financial website www.StreetSmartReport.com and a free daily Internet blog at www.SyHardingblog.com. In 1999 he authored Riding The Bear – How To Prosper In the Coming Bear Market. His latest book is Beat the Market the Easy Way! – Proven Seasonal Strategies Double Market’s Performance!