I’ve been doing some recent work on housing to check back in with the health of the recovery. There are a number of different statistics we can look at to gauge housing’s health.
Doug Noland, a credit bubble historian and analyst, spoke with Financial Sense Newshour about the global credit bubble now forming, which he calls the "Granddaddy of all bubbles."
Breadth indicators were extraordinarily strong last week. The NYSE daily and weekly advance-decline lines hit all-time highs. The NYSE Unweighted Average, which eliminates the impact of large cap stocks, also hit an all-time high last week. Bears would argue that this leaves us no place to go but down. But, there are very few divergences in the market currently that indicate a selloff is imminent.
Various employment data shows continued improvement in the U.S., helping to support higher stock prices with the perception of economic recovery. As long as the employment situation continues to improve and recession risk remains low, US stock prices are likely heading higher.
There wasn’t a lot of driving news this week. Price has been the biggest catalyst of this move. Higher highs beget more highs, which has attracted more bullish sentiment and more believers.
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The Economy and Markets React
Some have called it the “New Normal”, others have difficulty explaining it. Economists are bewildered, as the old economic prescriptions don’t seem to work. Policy makers are equally perplexed.
The market continues to march higher in 2013 as the short-term to long-term trends and momentum for the S&P 500 remain bullish. The market is currently rallying on broad-based participation and thus is not showing any of the major warning signs of a significant top which is typically characterized by selectivity.
The Dow Jones, as well as a number of other equity indices, has recently achieved new all-time price highs. Was it really a question this would occur? We do need to remember we’re now just edging above price levels seen almost six years ago in 2007 and thirteen years ago in early 2000, and on an inflation adjusted basis we’re still close to 20% below old highs.
There is an endless parade of “experts” that will go on TV or send you a free copy of their newsletter telling you emphatically what is going to happen in the market. They will also tell you why what is happening shouldn’t be happening and give you an often complex reason for why things are happening.
Stocks breached record new highs this week as the Dow Jones Industrial Average joined a burgeoning group of indexes hitting new all-time highs with the S&P 500 just a stone’s throw away from joining the group.
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