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Housing, Transportation Giving Opposing Signals on Economy.

  • Written by Syndicated Publisher No Comments Comments
    May 30, 2014

    I have often written of how the housing and auto industries are the most important market sectors. They are the largest purchases most consumers make, purchases usually made not only with current income, but spending now years of future income by borrowing through mortgages and auto loans. They also have the most impact on the health and job growth in a wide range of businesses that are their suppliers.

    So, it’s not surprising that they have a long history of leading the economy in  both directions, even to the extent of into and out of recessions.

    And, for a number of months now, in fact since home prices and mortgages began rising a year ago, a slowdown in the housing industry has been a growing concern. So much so that the concerns showed up in the Fed’s always optimistic outlook, in Fed Chair Yellen’s testimony before Congress a few weeks ago. 

    However, I have also written often over the years about how the DJ Transportation Average usually has a better take on the economy than other market indexes. Transportation companies get an early look at incoming volume of raw materials and supplies to businesses, and at rising or falling shipments of finished goods.

    And unlike the other indexes, the DJ Transports broke out of their narrow sideways trading range to the upside six weeks ago, and is now up 8% for the year-to-date.

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    So should investors be optimistic based on what the transports seem to be saying, or worried by the potentially opposite outlook for the economy coming from the housing industry?

    So far, it’s been no decision in either direction.

    Year to date: Dow: +0.2%   S&P 500: +3.2%   Nasdaq:  +0.2%.   Russell 2000: –3.2%

     Average +0.1%. 

     

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    Previous important reports, the employment report for April, housing reports, consumer confidence, and a few others, each with surprises in one direction or the other, failed to move the market to any degree.

    There are important economic reports coming out this week, Durable Goods Orders, Home Prices, Consumer Confidence, the next revision to 1st quarter GDP, etc.

    Perhaps this week?

    The first of the reports was released this morning.

    Durable Goods Orders were up only 0.8% in April, after surging up 3.6% in March. But that beat the consensus forecast of a decline of 0.8%. Durable goods orders are notoriously volatile month-to-month, and economists expected a bigger decline after March’s unexpected big 3.6% jump. The volatility in the number was demonstrated again. The previous report for March was a jump of 2.5%, but that was revised in this report to 3.6%. All of the 0.8% gain in April was due to  a big jump in defense orders. Ex-defense, new orders did decline 0.8% in April.

    To read my weekend newspaper column click here: Are Some Proven Investment Strategies Too Simple To Accept?

    Images: Flickr (licence attribution)

    About The Author – Sy Harding, Street Smart Report

    Sy Harding publishes the financial website Street Smart Report Online and a free daily Internet blog at Sy’s Free Blog. 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!

    It includes our research and analysis on the economy and markets, and provides charts and buy and sell signals on the major market indexes, sectors, bonds, gold, individual stocks and etf’s, including short-sales and ‘inverse’ etf’s.

    It provides two model portfolios as guides. One is based on ourSeasonal Timing Strategy, one on our Market-Timing Strategy.

    In depth updates are provided every Wednesday, with interim ‘hotline’ updates every time we make a trade. An 8-page traditional newsletter Street Smart Report is provided on the website every 3 weeks, in pdf format for viewing or printing out.

    There is the Street Smart School of online technical analysis ‘seminars’,commentaries to keep you ‘street smart’ about Wall Street, and much more. 

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