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MV Weather Report: Still Monsoon Season for the Housing Market?


Rain or shine, we review the day's biggest stock stories.

Today was a sleepy trading session. It seems like most traders are counting the days until the 3-day weekend.

The housing-starts data -- which came in at 458,000, vs. estimates of 520,000 -- met with mixed reactions on Wall Street. For those not in the know, a housing start is the number of new residential construction projects started in the past month. It's generally regarded as a good indicator of economic strength.

Though the overall number was worse than expected, single-family-home starts saw an increase; some viewed this as a positive. Hence the market's mixed reaction.

The question: Is housing really showing signs of bottoming? Though we've seen some positive data recently (e.g. Lowe's (LOW) earning report yesterday, the semi-good housing-start numbers today), many remain skeptical.

On the Buzz and Banter today, Professor Branden Rife gave his opinion:

"These days, everyone is trying to pick a bottom in housing. So for those interested in housing proctology, I would point you to none other than the price of lumber.

"Last I checked houses are built with wood. Lumber led the initial swoon in the HGX by over 4 months back in 2006 and it will lead (or at the very least confirm) any upside breakout when the time comes.

"For the moment, lumber is basing between 168 and 207. The next time the HGX tests its long term downtrend line, take a look at lumber and see if it is confirming the move. So far, it hasn't.

"In fact, lumber's weekly chart looks kind of like a hockey stick. Imagine that! "


Click to enlarge


Click to enlarge

I would say that I think housing in general will most likely bottom once the unemployment rate stops climbing. For those who want to attempt to play the housing market, check out homebuilders like Pulte (PHM), Toll Brothers (TOL), KB Home (KBH), and Lennar (LEN).

Professor Bill Feingold is stopping by MVHQ tonight. We're going to get some wings, some beer, and watch the Lakers ( I hope he's a fan).

Have a great night, Minyans!
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