Housing Index - The Branch Creaks Loudly
posted May 13, 2006 at 01:44PM
The index has just broken some significant trend-line support. The momentum indicators are bottomed out so I wouldn't be surprised to see some retesting here. With the dollar in free-fall I can see the Fed having to turning some taps off in an effort to stabilize the currency market. I am of the mind that the HGX will resolve bearishly.
HUI vs HGX
Both gold and housing have benifited from "easy" money and have traded in sync to some degree. I would not make big bets though on the two trading in concert indefinitely. If the Fed does tighten, it may give traders an excuse to profit take on gold, which occurs coincidently with housing breaking down, but that will only be a head-fake as far as gold is concerned, despite what hard-core deflationists may say.
One, housing has no premium for geo-politics which looks to remain on the radar for years to come. As well, the upcoming war with Iran, will further mutilate what is already a horrendous goverment fiscal state. This increases the allure of gold whereas, I can't see this benifitting housing as a whole.