Can we see into the future?

I found (actually my intern found it and showed it to me) an interesting article a minute ago, it is a chart of the S&P 500 and the NAHB housing index charted together. The S&P 500 is known to lag the housing market by about 12 months, with a near 80% correlation (which is pretty strong).

We all know what the housing market is doing and what it is likely to do in the near and mid-term future. This chart suggests that the market is going to tank within the next year, as the housing market is doing now. With the current data coming out showing this is likely the case, it seems that this correlation is only going to get stronger in the near future. Add that to the Feds interest rate hike campaign that lasted so long, we could easily see a recession looming on the horizon if the Feds over did it.


http://www.safehaven.com/article-5772.htm

Long Summer

It has been a very long and slow summer. Many traders out there have taken extended vacations and there really hasn't been anything to write home about.

The little war in Lebanon, coupled with the oil pipeline problem in Alaska has caused some oil jitters recently, keeping oil prices elevated. Adding to the problem of $70+ oil is Iran, they are still up to their old tricks, trying to rock the oil market by threatening everyone. They have blown off U.N. demands and risked sanctions against their country over their nuke program, this has caused a large risk premium to build in the oil markets as traders are unwilling to sell with the possibility of war with such a large supplier to the global oil markets. Today a rumor rippled through the markets that Iran has made a breakthrough in their nuclear program which sent oil north slightly after a surprisingly bearish oil inventory report.

Hopefully, after the coming holiday, traders will return to their posts to get the overall volume back up to a respectable level. Until then, be patient and selective.