Monday, May 18, 2009

The Next Rally

Personally I still think we have lower to go before this summer rally comes that I am looking for that I have mentioned several times on this blog. I do not think the absolute lows are in over the next two years but I still think there is a high probability of us breaking 1000 on the S&P over the summer. The continued giant headfake.

I have tagged housing as the catalyst for this surge. I think housing prices have very good odds of increasing on a non seasonally adjusted basis. It means nothing but will continue to get the market in a fervor. Your already seeing this thinking. From a marketwatch article.

U.S. stock investors on Monday fixated on the housing market to gauge economic growth going forward, with better-than-anticipated earnings from a home-improvement chain helping boost sentiment.

First of all, there is no housing news today. LOW earnings were not that great and they lowered revenue guidance. Lets get excited. The builders come out at some point but not really taht great of a data point that means anything.

"Housing is a leading indicator of economic activity, and many see the sector as leading the economy in and out of recession," T.J. Marta, a fixed-income strategist for Marta on the Markets LLC, wrote in a research note.

If housing prices go up on a non seasonly adjusted basis you could hear the chatter about economic recovery turn into an absolute mouth screaming roar. With the recasts coming in various debt instruments and implosion of Alt A this fall into 2010 it will just be a headfake.

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