Tuesday, March 17, 2009

Morning Update/ Market Thread 3/17

Good Morning,

Futures are up slightly this morning, here’s a chart of the overnight action:

We were actually slightly negative and then housing starts came in higher than expected, mainly on an increase in construction of condos and apartments. My take is that any increase in this number is not good until demand equals supply. Bringing more supply into a market with too much capacity will only keep pressure on prices. The article below also reports on producer prices:
U.S. Housing Starts Unexpectedly Increase on Condos

By Shobhana Chandra

March 17 (Bloomberg) -- Housing starts in the U.S. unexpectedly surged in February from a record low on a rebound in condominiums and apartments that signaled builders cut too deeply as the credit crunch intensified at the end of 2008.

Work began on 583,000 homes at an annual rate, a 22 percent increase from January that was the biggest jump since 1990, the Commerce Department said today in Washington. Multi-family units climbed 82 percent.

“Any letup would be encouraging,” Michelle Meyer, an economist at Barclays Capital Inc. in New York, said before the report. “We may begin to see housing starts reach a bottom in the second half, contingent on a recovery in financial markets and in the economy. I don’t think the end is too far out.”

Building permits, a sign of future construction, rose less than starts, indicating construction may again slow. Developers are still contending with record foreclosures that depress prices and profits, and put pressure on the Federal Reserve, which meets today and tomorrow, and the Obama administration to solve the credit crisis.

A separate report showed producer prices rose 0.1 percent in February, less than the 0.8 percent gain in the previous month. On a year-on-year basis, wholesale prices fell 1.3 percent, with a 4 percent increase after stripping out food and energy costs.

There was a small movement on the McClelland Oscillator yesterday, meaning that a large price move is coming either today or tomorrow, direction unknown.

The short term stochastic indicators say that some rally is possible in the short term, but the oscillators have been running in the extremes lately, and the 60 minute and daily are overbought, and thus more selling could happen before a short term bounce.

As you weigh the possible outcomes of all the rumors and plans to save the world, keep your eye on the debt. The best outcome for the banks is that they can get the debt out of their possession. Even if that happens, where does the debt go and who is responsible to service it?

I’m going to have a very busy week, so you may see a little less activity from me this week (tax season among them), but I’ll still be around and will make pertinent comments on the daily thread as I see important inflection points.

Europe is lower, gold is lower, bonds are up slightly, and the dollar is up slightly.

Have a great day, I’ll see you in the daily thread…


BTW, if you look at the Martin/Mann Reality Index, you will see that the rally over the past week added back $1 trillion in stock market "wealth." (not saying it will stick around long - LOL)