Technical Analysis Note For Week Ended October 26, 2012 – Watch Housing:
The stock market has been under pressure for the last two days and we have been reassessing our portfolio after a strong down day Friday. The leadership from small caps, tech and the financials eroded towards the end of the week with stocks like Google getting pushed back after revealing a weak 3rd quarter earnings report.
The housing market is showing signs of life again but we are still cautious because unemployment is high and a large proportion of housing sales are happening via investors with cash not the ‘middle class’. Housing starts jumped 15 percent in September 2012 eclipsing a four-year high and consumer confidence is up which helps us stay bullish long term and we believe this holiday will be another record breaker. Right now we are watching housing stocks to see if the continued strength in stock prices will last through the end of the year.
Even if the housing boom doesn’t consist of ‘average’ buyers, stocks could be moving in anticipation of a rebound and it’s hard to argue that a rate of growth trend change hasn’t occurred over the last few months. If housing stocks fall in the next few sessions, we would hold off on purchasing equities in any sector until support levels hold.