Best of the Week
Most Popular
1. Market Decline Will Lead To Pension Collapse, USD Devaluation, And NWO - Raymond_Matison
2.Uber’s Nightmare Has Just Started - Stephen_McBride
3.Stock Market Crash Black Swan Event Set Up Sept 12th? - Brad_Gudgeon
4.GDow Stock Market Trend Forecast Update - Nadeem_Walayat
5.Gold Significant Correction Has Started - Clive_Maund
6.British Pound GBP vs Brexit Chaos Timeline - Nadeem_Walayat
7.Cameco Crash, Uranium Sector Won’t Catch a break - Richard_Mills
8.Recession 2020 Forecast : The New Risks & New Profits Of A Grand Experiment - Dan_Amerman
9.Gold When Global Insanity Prevails - Michael Ballanger
10.UK General Election Forecast 2019 - Betting Market Odds - Nadeem_Walayat
Last 7 days
This Invisible Tech Stock Threatens Amazon with 800,000+ Online Stores - 21st Nov 19
Crude Oil Price Begins To Move Lower - 21st Nov 19
Cracks Spread in the Precious Metals Bullion Banks’ Price Management System - 21st Nov 19
Why Record-High Stock Prices Mean You Should Buy More - 20th Nov 19
This Invisible Company Powers Almost the Entire Finance Industry - 20th Nov 19
Zig-Zagging Gold Is Not Necessarily Bearish Gold - 20th Nov 19
Legal Status of Cannabis Seeds in the UK - 20th Nov 19
The Next Gold Rush Could Be About To Happen Here - 20th Nov 19
China's Grand Plan to Take Over the World - 19th Nov 19
Interest Rates Heading Zero or Negative to Prop Up Debt Bubble - 19th Nov 19
Plethora of Potential Financial Crisis Triggers - 19th Nov 19
Trade News Still Relevant? - 19th Nov 19
Comments on Catena Media Q3 Report 2019 - 19th Nov 19
Venezuela’s Hyperinflation Drags On For A Near Record—36 Months - 18th Nov 19
Intellectual Property as the New Guild System - 18th Nov 19
Gold Mining Stocks Q3’ 2019 Fundamentals - 18th Nov 19
The Best Way To Play The Coming Gold Boom - 18th Nov 19
What ECB’s Tiering Means for Gold - 17th Nov 19
DOJ Asked to Examine New Systemic Risk in Gold & Silver Markets - 17th Nov 19
Dow Jones Stock Market Cycle Update and are we there yet? - 17th Nov 19
When the Crude Oil Price Collapses Below $40 What Happens? PART III - 17th Nov 19
If History Repeats, Gold is Headed to $8,000 - 17th Nov 19
All You Need To Know About Cryptocurrency - 17th Nov 19
What happens To The Global Economy If Oil Collapses Below $40 – Part II - 15th Nov 19
America’s Exceptionalism’s Non-intervention Slide to Conquest, Empire - and Socialism - 15th Nov 19
Five Gold Charts to Contemplate as We Prepare for the New Year - 15th Nov 19
Best Gaming CPU Nov 2019 - Budget, Mid and High End PC System Processors - 15th Nov 19
Lend Money Without A Credit Check — Is That Possible? - 15th Nov 19
Gold and Silver Capitulation Time - 14th Nov 19
The Case for a Silver Price Rally - 14th Nov 19
What Happens To The Global Economy If the Oil Price Collapses Below $40 - 14th Nov 19
7 days of Free FX + Crypto Forecasts -- Join in - 14th Nov 19
How to Use Price Cycles and Profit as a Swing Trader – SPX, Bonds, Gold, Nat Gas - 13th Nov 19
Morrisons Throwing Thousands of Bonus More Points at Big Spend Shoppers - JACKPOT! - 13th Nov 19
What to Do NOW in Case of a Future Banking System Breakdown - 13th Nov 19
Why China is likely to remain the ‘world’s factory’ for some time to come - 13th Nov 19
Gold Price Breaks Down, Waving Good-bye to the 2019 Rally - 12th Nov 19
Fed Can't See the Bubbles Through the Lather - 12th Nov 19
Double 11 Record Sales Signal Strength of Chinese Consumption - 12th Nov 19
Welcome to the Zombie-land Of Oil, Gold and Stocks Investing – Part II - 12th Nov 19
Gold Retest Coming - 12th Nov 19
New Evidence Futures Markets Are Built for Manipulation - 12th Nov 19
Next 5 Year Future Proof Gaming PC Build Spec November 2019 - Ryzen 9 3900x, RTX 2080Ti... - 12th Nov 19

Market Oracle FREE Newsletter

$4 Billion Golden Oppoerunity

U.S. Housing, Dollar and Bonds

Stock-Markets / Financial Markets 2009 Nov 23, 2009 - 09:36 AM GMT

By: Paul_J_Nolte

Stock-Markets

If this is the recovery, I would hate to see what a recession looks like!! Housing data released in the last week showed a still lousy housing market – from home builder confidence index that declined by a point to remain well under 20 (50 is “balanced”). Even traffic for new homes was near record lows. Housing starts and permits (a leading indicator of future starts ) both fell again. The Mortgage Bankers report of home purchases fell to a new low and are still down 15% vs. year ago levels.


Manufacturing, a mini-bastion of relative health, saw a modest rise in capacity usage, although output was stable and inventories fell. The much hoped for inventory-rebuilding process remains elusively somewhere in the future. On top of all that, Treasury Secretary Geithner defended the administrations actions while Fed Chief Bernanke made a rare comment on the declining dollar. A short week with a short list of things to be economically thankful for, so take comfort with family and friends and enjoy the time together.

Wall Street seems to have taken off early for the Thanksgiving week, as volume once again contracted and has been 5-25% below the past four week average since the opening days of the month. The shortened week will contract many of the economic releases into the first three trading days, but the focus of the markets seem to be strictly on the dollar. Moving nearly exactly opposite of the dollar on a daily basis, any significant (and surprising) rally in the dollar could bring about a quick decline in stocks.

Our longer-term indicators have already rolled over and have been declining for a few weeks, while many of the daily readings are attempting to surpass their highs made in late September. It is these divergences, while they can last for quite some time, are early warning signs not everyone in the markets are dancing to the same tune. Small cap stocks have been under performing the SP500 since mid-September and have turned lower from their second attempt at new recovery highs. The international markets, due to some modest strengthening of the dollar, is also beginning to under perform the SP500. Given that the correlations between each of the markets have been high since the bottom in March, we could see a global correction in the equity and corporate bond market sometime in the next 6 months.

For the first time in four weeks, the bond model has flipped over to a positive reading, with a decline in the yield on 30-year bonds getting just under 4.3%. The big news in bonds was the negative yield on short-term treasuries – meaning you automatically lost money making the investment. This was last seen in this market during the financial collapse last year, however this year money managers are looking for the most liquid place to stash cash until yearend.

The difference between the short and long-term bonds remains well above 4% and based upon historical duration of 4% spreads, we could see the spread stay in this range until near mid-year 2010. Commodity prices and gold continued their rise as the dollar declined. Keep an eye on long-bonds, as a further decline likely will spell additional deflationary pressure.

By Paul J. Nolte CFA
http://www.hinsdaleassociates.com
mailto:pnolte@hinsdaleassociates.com

Copyright © 2009 Paul J. Nolte - All Rights Reserved.
Paul J Nolte is Director of Investments at Hinsdale Associates of Hinsdale. His qualifications include : Chartered Financial Analyst (CFA) , and a Member Investment Analyst Society of Chicago.

Disclaimer - The opinions expressed in the Investment Newsletter are those of the author and are based upon information that is believed to be accurate and reliable, but are opinions and do not constitute a guarantee of present or future financial market conditions.

Paul J. Nolte Archive

© 2005-2019 http://www.MarketOracle.co.uk - The Market Oracle is a FREE Daily Financial Markets Analysis & Forecasting online publication.


Post Comment

Only logged in users are allowed to post comments. Register/ Log in

6 Critical Money Making Rules