The Housing Index Nears Down-Side Objectives
posted Jun 8, 2006 at 06:12PM
Housing Index Daily
Housing Index Weekly
As anticipated the Housing Index has certainly resolved to the downside. As "hypothesized" this break down did nothing for, and indeed coincided perfectly with the chop job being done to gold stocks.
The rationale being that since both benifit from easy money, both would react adversely if there was a fear that the taps werre going to be turned off.
Regular readers will remember that I am of the mind that at some point gold and housing will disconnect. That point being when the market starts suspecting that the Fed is going to come to Housing's rescure and turn the liquidity tap back on. At that point things gold would be the first to anticipate/react to that.
Past discussions gave 200 as a measured move objective for the triangle break-down. This also works if you are looking at the chart as a slanted H&S. More importantly it corresponds to significan horizontal support.
The momentum indicators are certainly all bottomed out.
So technically things are of interest to a contrarian perspective. However that does mean you automatically go and buy?
At this point you do have to do some fundamental thinking. Is the market wrong on housing? Was the sell-off an emotional knee-jerk affair with no real basis?
I do not think the above applies here. Housing has had many aspects of a bubble, benifitting artificially from everything to speculation, collapsing lending pratices, post 9-11 liquidity injections. Too high a percentage of housing in too many areas of the US were not places where people were living, but simply vehicles to flip in search of a "greater fool".
I certainly would not buy in "anticipation" of a bottom. Set up some kind of resistance metric that need's to be broken and gives you some kind of substantial buy signal.
I would keep on eye on it as any kind of bounce should also coincide with at least some stability for gold stocks.