Monday, July 20, 2009

Homies Looking Better but Not Great

The point of today's column was to show that despite some of the news that's out there, the market still has not blessed the housing sector with recovery. Don't get me wrong, I do think the worst is finally over but as far as giving it my blessing, not that I deserve to bless anything, and by extension my blessing on the economy, well, you know the rest.

Here's a version of the Toll Brothers chart that I did not publish today:

Yes, that is a short-term breakout but check out on-balance volume. Nobody is accumulating this dog. Meritage was better but not enough to get me excited about it.

The bottom line is that an investment in homebuilders should pay off in a year or two but I am looking for more of a pre-construction price.


Paul O'Cuana said...

I think it was in Alan Abelson's column a month or two ago when I heard a completely different take on the "good" news of more new home starts.
Something along the lines of "that's all we need, more housing inventory".
I guess we can hope that new homes are part of a different market, to wit: to some people they're like toothbrushes or toilet seats, you just have to have a new one.

Paul O'Cuana

Amalan said...

I think the market will continue to "edge" up and down until all earnings reports are out, unless there is a sudden nasty surprise. I am thinking when the majority of the companies (of SP500) complete reporting, the lull in the news would be good enough to start the slide.. of course, this is just a gut feeling; tough to expect an immediate sell off when there seems to be a lot more people looking for a correction now than a week ago.

One more piece that fell into place is Goldman expressing that it expects SP500 to leap to 1060 by the close of the year, up from its previous estimate of 940 points. I remember the crude oil call at 147, looking for 200 by the end of that year. I guess we just got another step closer to the breaking point in the market.

Will said...

Goldman Sachs' analyst predictions are contrarian indicators. Their targets have been wrong while while all their profits have been from prop trading. Their traders must also believe their analyst's predictions are contrarian indicators.

Ramu said...

the only thing that can cause a slide from these levels is when everybody leaves the bear camp that will take a while. I see there is still a lot of bearishness from technical perspective and a fundamental perspective. Also, another thing to watch is the long term downtrend line on qqqq. That leaves room for another 5 percent rally. Hopefully that should cause a short term pullback. Again this is only for nasdaq. not sure about other indexes. Mike any idea how high we can go from here?

Michael Kahn said...

Paul - awesome!

Michael Kahn said...

Amalan - I love fundamental analysts!

Michael Kahn said...

William - ditto> I love geniuses like that. Remember the Dow 36,000 guy? Do you want fries with that?

Michael Kahn said...

RB - any idea how high? I'm a bear. It "should" not be this high! lol

I actually ran a chart in the newsletter today about one possible scenario, assuming we did not see a breakout failure today.