1) We may see some weakness in the “Housing Market Indicator” as the prospect of the housing market post-homebuyer credit begins to be seen. All this will do is embolden the industry advocates to pass another homebuyer credit stimulus which I expect to pass. While it may produce higher home sales over the spring and connect into the summer season, what makes this problem different than the lower car sales? Is this credit simply dragging demand from the future, demand that won’t be there when the credit expires like the cash for clunkers has shown us thus far? If you are going to say that a home is an investment that you keep and that it will increase in value, take a look at the amount of inventory that we still have on tap….take a look at the foreclosure wave coming…take a look at the unemployment rate…take a look at all the debt the American consumer already has. Housing bubbles do not correct quickly from what history has taught us and I do not believe this time will be different.
2) Ben Bernanke’s speech is of particular interest to me. Will he say anything about the dollar? Will he say that the downward movement in the “buck stops here?” If he does make a forceful warning, will that be the time that the dollar turns? We have already seen repeated attempts at jawboning, however the market is literally daring the Fed to make a move. If the Fed does indeed make that move, we could be in for falling markets very quickly.
3) The Case Schiller index will probably show more of an increase in housing prices, however, I continue to believe that this is a whole lot of noise in an otherwise downward trend. If it does come negative, look for more push for the homebuyer credit.
4) Durable goods orders Ex Aircraft and Defense have shown decreases for 2 months in a row in what is a warning sign. A third negative reading would be more food for the bears to feast on.
5) Q3 GDP is sure to rock the house as gov’t stimulus has done it’s job in restoring growth to the American economy. However, what true secular bull markets are made of is sustainable growth. While we will see a great print here, this will be the best print we have for a while, absent some “immaculate recovery” which is what the equity market has priced in.