I’ve Seen These Symptoms Before…

Housing and financial stocks are once again in the gutter and have seriously lagged this latest rally. This is eerily similar to the market top in 2007. In this Credit-based economy, we need a healthy financial sector And we need an improving housing market to buoy consumer sentiment and spending. This is a big red flag in my view towards the recent rally. If these two sectors were to catch up then we would probably have another sustained leg higher; but they’re not and that is cause for worry.  On the bright side, consumer stocks have accompanied the rally.  Is this the market’s way of telling us that the job market is coming back?  We’ll have to see, but recent indicators such as the Conference Board Employment Trends and NFIB Small Business Optimism report don’t show very promising signs towards strong job creation in the months ahead.

 

(Above = Chart from April Top; SPY in purple)

(Below: Circle = 2007 S&P500 Top)

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(Above = Chart from April Top; SPY in purple)

(Below: Circle = 2007 S&P500 Top)

 

 

 

 

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