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Do We Short Existing Home Sales?

By Rick Ackerman Posted on March 21, 2012, 5:17 am EDT Last Updated March 21, 2012, 2:04 pm EDT

It’s late Tuesday night and index futures are wafting higher, not so much propelled by buying as made temporarily weightless by the blissful absence of volume. The E-Mini S&Ps are trading 1405.00 at the moment after having failed to head-butt their way any higher than 1402.00 earlier in the day. This suggests DaBoyz are building momentum for a short-squeeze ahead of Wednesday’s opening. They’re bound to get help when existing home sales are released, since this particular datum has quite evidently been brought to heel by Team Obama 2012.  The near certainty of a bullish housing number raises the question of whether we should want to risk impeding a possible buying stampede with the short offer we’d placed earlier at 1412.75. The answer is a qualified yes, although no longer via a straight offer at that price with the usual micro-tight stop-loss. We’d originally recommended that tactic to Rick’s Picks subscribers, along with another, more challenging, “camouflage” entry strategy that would attempt to control risk even more tightly.

The latter is generally a wise course to follow in situations where the trader could get blown out of the water for the mortal sin of having followed heart and mind rather than instinct. The three are rarely aligned, especially when stocks have spent the last three years climbing a wall of worry that might have seemed insurmountable to some.  But just as paranoids can have actual enemies, cynics who think bulls must be out of their minds can sometimes be right.  Without casting aspersions on those who have been doing the buying, the cynic might also point out that rising shares have been driven less by bulls than by a tidal swell of easy money purposed to…lift asset values.  And of course, cynics married to bullion would further note that the one sector — other than residential real estate — that has failed to respond to global easing is…junior mining stocks. But that’s another story for another day.  However, and for what it’s worth, the Junior Gold Miner ETF (GDXJ) got so close yesterday to our downside target at 23.93 that we’re looking to bottom-fish near current levels.

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  • John Jay March 22, 2012, 2:56 am

    Gary,
    How long can we run $200 billion dollar a month budget deficits?
    The stock market is not the economy.
    The top 10% probably own 75% of the net worth of the USA. Those are the people who benefit from a rising stock market.
    I think tax revenues will be very thin this April 15th, a lot of people fell off unemployment which is taxed by the Feds, and those who found new jobs are making a lot less. We will know this time next month.

  • gary leibowitz March 21, 2012, 9:50 pm

    This bunch reminds me of the tea party’s rallying cry to downsize big government. The fact that most of the tea party members don’t have a college education and rely on government dole in one form or another is ludicrous.
    Paranoia run rampant along with a masochistic nature. It’s like trying to have a rational conversation with someone hell bent on denying Obama’s birth right. There are no facts in the world that can satisfy a person with blinders on. Facts become forgeries, forensic science becomes witchcraft.

    I can say with confidence that I was one of the earliest doom and gloomer. I correctly saw that we hit a debt saturation point where it would be impossible to ignore, or correct. What I don’t subscribe to is this insane notion that there is an all powerful malevolent group determined to take away all citizens money and rights.

    Perhpas you can ignore history but believe it or not we have gone thru these cycles before and came out the better. The dark hours are always seen as interminable but they do end.

    Ask yourself how you felt at the depths of the crash when we hit that ominous 666 on the SP500. Were you content to accept all was lost and that nothing short of zero would satisfy your notion of total destruction, or did you see it as a buying opportunity.

    There is no black and white solution that gets displayed on the stock market price, no validation that we screwed up badly, no absolute punishment for wrong deeds.

    Disregarding history because “this time is different” is the long shot that only a fool will bet his money on.

    While I claim to have a very good analytical mind and I am in agreement on many of the issues spoken here, I do not think civilization is on the brink of extinction. I believe the market can have sensational up moves even in the midst of this debt unwinding. The reason is simple. Human emotions play a strong role in market moves. Hope, denial, and some good news can go a long way.

    Earnings are not some phantom. No smoke and mirrors. If the majority of citizens are in deep trouble as you say than how do you explain the surge in dinning out. That is a clear indication of discretionary spending. Corporate earnings has to come from someone somewhere spending money. No amount of fed spending can prop up earnings directly. It can help keep the spending machine alive. That is all it can do. In the end however debt gets increased and the outcome is the same, unwinding of that debt.

    I am here to proclaim that the end of the world has been suspended till a later time. Stay tuned.

    • redwilldanaher March 22, 2012, 3:36 am

      “This bunch reminds me of the tea party’s rallying cry to downsize big government. The fact that most of the tea party members don’t have a college education and rely on government dole in one form or another is ludicrous.” – I’m not even sure what you’re driving at here but a so-called “college education” is vastly overrated in many ways and may not even make economic sense anymore. Colleges have become credential mills that provide “must have” tickets to job pool that is by and large run by idiots

      “Paranoia run rampant along with a masochistic nature. It’s like trying to have a rational conversation with someone hell bent on denying Obama’s birth right. There are no facts in the world that can satisfy a person with blinders on. Facts become forgeries, forensic science becomes witchcraft.” – This is a poor attempt at a joke right? You have no facts whatsoever other than the false ones conveniently provided to you by the MSM of which you seem all-too-eager to swallow IMO. Please provide me with the factual evidence that beyond a doubt proves that this power structure puppet is a legitimate natural born citizen.

      “I can say with confidence that I was one of the earliest doom and gloomer. I correctly saw that we hit a debt saturation point where it would be impossible to ignore, or correct. What I don’t subscribe to is this insane notion that there is an all powerful malevolent group determined to take away all citizens money and rights.” – WE HIT ONE? It’s only gone further parabolic since then! What do they have to do to you so that you can grasp the notion? Does the boot need to be on your face before you can recognize it?

      “Perhpas you can ignore history but believe it or not we have gone thru these cycles before and came out the better. The dark hours are always seen as interminable but they do end.” – Yes they do and history is littered with failed governments especially those helmed by incurable sociopaths that rely on fiat currencies to placate the masses indefinitely.

      “Ask yourself how you felt at the depths of the crash when we hit that ominous 666 on the SP500. Were you content to accept all was lost and that nothing short of zero would satisfy your notion of total destruction, or did you see it as a buying opportunity.” – I care more about the world I live in than bogus indexes and bogus index levels. Most people have lost big time by staying long stock and being short inflation. Do you really like the market over the past 10 years than gold? I’m realizing more and more that you lean left and that the markets are all important to you as opposed to the reality of a society’s disintegration.

      “There is no black and white solution that gets displayed on the stock market price, no validation that we screwed up badly, no absolute punishment for wrong deeds.” – Once again, do a little research off the MSM grid and it won’t take long for you to learn that there isn’t just a little fraud, it has permeated everything and the corporate accounting altar that you seem to worship at is infinitely more rigged than carnival games.

      Disregarding history because “this time is different” is the long shot that only a fool will bet his money on.

      “While I claim to have a very good analytical mind and I am in agreement on many of the issues spoken here, I do not think civilization is on the brink of extinction. I believe the market can have sensational up moves even in the midst of this debt unwinding. The reason is simple. Human emotions play a strong role in market moves. Hope, denial, and some good news can go a long way.” – There’s no doubt the markets can be manipulated in either direction and dramatically so.

      “Earnings are not some phantom. No smoke and mirrors. If the majority of citizens are in deep trouble as you say than how do you explain the surge in dinning out. That is a clear indication of discretionary spending. Corporate earnings has to come from someone somewhere spending money. No amount of fed spending can prop up earnings directly. It can help keep the spending machine alive. That is all it can do. In the end however debt gets increased and the outcome is the same, unwinding of that debt.

      I am here to proclaim that the end of the world has been suspended till a later time. Stay tuned.” – That’s wonderful news. It’s great that you’re happy that the rotten-to-the-core power structure has been able to remain intact and in gain greater dominion over all our lives. Corporate earnings are a fraudulent joke but choose to believe the propaganda if you wish. I can’t fathom how you can’t see that by keeping the fire burning with limitless supplies of lighter fluid that the FED isn’t directly helping corporations even in some small way. Do you not recall that the FED gave money to foreign companies and banks to keep them afloat? Where did that come from Gary? If you guessed thin air then you’d be correct. It’s a fraud, always has been, always will be. It is backed by nothing. Voila! Your balance sheet is now healthy! This episode of yours is one of the greatest print examples of White Mouse Retention Syndrome I’ve ever come across. 3 years later and you’re willing to swallow the same BS they were selling you then. Ratings agencies are a fraud. Did you not see that? The last 20 years of our so-called economy have all been asset bubble based courtesy of the Fraud, I mean the FED. Did you miss that? If things have been so great then why have stockholders been left holding the bag now for over a decade? Why are more Americans on food stamps than ever, nearly 1/6th of the population? Why is the reported debt ballooning insanely? Why is un /underemployment over 20%? Keep ingesting their poison and you’ll be too weak to resist when they lead you to the slaughterhouse. The stock market is the most manipulated of all markets and they can do nearly anything they want with it, like I don’t know, Nasdaq 5000. Were you the type that was inferring that all that made sense then? Did the housing market “make sense” to you too in 2006? Do you draw inferences from bogus reports about discretionary spending that are issued by professional propagandists and declare that all is well? From where I sit there are things that are more important than Index levels but to each is own.

  • redwilldanaher March 21, 2012, 8:42 pm

    I just issued this; I call it the Pawleys Island Address 2012. It’s “slightly” derivative but I hope that some of you may appreciate it nonetheless…

    We must hereby conclude that the dead did indeed die in vain — that this Corporation, no longer under God, has given birth to a dystopia — and that a so-called government of the sociopaths, by the sociopaths, and for the consumption of those that would be ruled by sociopaths, will likely not perish from the earth soon enough.

    • Steve March 21, 2012, 9:26 pm

      Amen!

  • Steve March 21, 2012, 6:54 pm

    Reality. I just returned from the largest Western Art show in the World. Artists that have never held a ‘job’ in 41 years are now working at the likes of Walmart. (this means unemployment stats have gone down) People who were making 100k are now making 30k. An auction of 600 pieces saw the estate of a collector, donated to a museum, dump 22 oil paintings that drew 20k bids 10 years ago, only to find bids in the hundreds. The great C.M. Russell Auction found 40% of lots falling short of minimum, no matter what the papers might say. Minimums are normally 50% of retail unless one is speaking of a Russell original.

    There were a very few bright spots, for a band of buyers and sellers that is so narrow it is unbelievable. Our common average artist bubble popped when there was no more turning houses and mortgages. But, any suggestion that things are getting better is pretty much fluff. Any suggestion that we are treading water is bunk. Things are worse with Walmart wages, and those who have been in the business for 40 years taking their socialist security and calling it quits. We cannot afford the fuel to travel. We cannot afford the increased costs of materials. We cannot afford to manufacture bronzes in this country.

    Things are not getting better. We the People are just falling deeper into the pit and taking jobs at the bottom of the hole. We once put foundry workers to work, framers to work, and put millions into a local economy with national level shows. Now we look for jobs that will not pay the bills while Corporate Persons get more and more and more and more breaks at the hands of the likes of Romney and Ryan.

    Buy Bronze Sculpture – at least they can be turned into projectiles.

    • John Jay March 21, 2012, 8:11 pm

      Agreed Steve.
      The MSM portrays a Matrix like Smiley Face environment more and more each day.
      Any county that voted Ron Paul in the primaries is simply not counted.
      Perhaps a faux struggle between Santorum and Romney, while Matrix Media reports employment is up, inflation is down, and the recovery is on!
      Oh, and chocolate rations have been increased once more!
      And 221 billion dollar budget deficits for one month are ignored.
      It has become crazier than I ever imagined possible.

  • Rich March 21, 2012, 6:03 pm

    Anyone who’s seen McNaughton’s latest painting:
    0 holding and pointing to a burning Constitution,
    ‘One Nation Under Socialism,’ may understand all these headlines of a bond bear and stock bull may be full of it.
    (Click on name to see.)

    When GS says ‘Stocks offer the best opportunity in a lifetime,’ I reach for my silver (targeting 58), to paraphrase Hermann Goring.

    I find myself inclined to agree with the Boulder Bond Broker posts and Rosie here:

    A. “The growing chorus of calls to shift out of bonds may be premature because our work finds that while corrections come and go, sustained bear markets do not occur until the Fed begins to take the ‘carry’ away by embarking on a rate-hiking cycle,

    B. The cup is half full … again?,

    C. The U.S. housing starts data may not be so bullish for the home-building stocks, but they sure will be for bonds and duration in general,

    D. Dudley sees a dud economy.”

    With the recent pullback in UST, we see a +53% target.

    It’s not good form to insult the moderator host dept:

    Technically, Rick has done a superbly profitable TA job day in and day out, since most are wrong and lose money most of the time. He is and does not, with his clear calls and tight loss limitation protocols.

    No one ever said it would be easy or fair. Not everyone wants to sip Mai Tai’s on the Lanai and have May Ling do the laundry by hand…

    • gary leibowitz March 21, 2012, 6:28 pm

      Just remember that this 3 year run has resulted in a very tame 14.5 P/E ratio on the SP500. You would have to assume the P/E ratio will spike before we see another bear run. That would imply either a dramatic fall off of earnings or a dramatic rise in price.

      I see 1995 all over again.

    • redwilldanaher March 21, 2012, 7:04 pm

      Yes Gary, and how valid are those gilded PE ratios? How much “stock” do you put in their legitimacy? I’m happy in a way that so many people are mesmerized by the crock market. That’s what makes it possible to spot gold sub $300 and silver circa $4.

    • Robert March 21, 2012, 9:54 pm

      “You would have to assume the P/E ratio will spike before we see another bear run”

      Why do we have to assume that? I don’t understand…

    • gary leibowitz March 21, 2012, 9:59 pm

      Robert,

      Use history as a guide. It would be a first to have another protracted bear market at such low P/E ratios. This makes sense since steep bear markets usually come about after a large percentage of individulas are invested. Today we are nearing a 13 year low in participation.

  • Cam Fitzgerald March 21, 2012, 4:51 pm

    And by the way, if anyone wonders why I do no subscribe to the service (as Rick has almost demanded) it is because I have come to the conclusion that most technical anlysis is pure bunk and snake oil. Not all, just most.

    If it was really so effective at timing market tops and bottoms then Rick would more likley be sitting with his feet up in Maui drinking a Mai Tai and getting his laundry done by service.

    Not pushing subscriptions.

    *****

    Cam, you will need to be on your best behavior or I will kick you out of here for good (a distinction you would share with just four others).

    And incidentally, the track record of Bluefin Financial LLC, a CTA that I formed several years ago with two other purely technical traders — both of them early graduates of the Hidden Pivot Course — is a matter of public record. RA

    • redwilldanaher March 21, 2012, 5:19 pm

      I disagree. TA can and has been effective. TA can assist you in playing the probabilities. Real traders know that trading for the long haul is a probabilities game and they use TA, risk mgmt (options) etc. accordingly. Since we’re now into our 3rd year of almost entirely centrally planned stock market indices I would advise that technicians adjust accordingly. If you doubt that this is the case you are truly un/misinformed. Spend an hour on the Internet and you can quickly learn that the FED, the PPT and foreign CBs have literally created fiat for the express purpose buying the stock market. You can also learn that this so-called rally has more unnatural statistical anomalies associated with it than any other including the NAZ 5000 lunacy period. Does anyone even taken the survivorship bias and the skewing of the members of the indices into account when they drone on about the rally du jour?

  • John Jay March 21, 2012, 4:04 pm

    Red,
    No wonder they are turning their attention to setting up the Police State that will be necessary once the collapse is upon us. “Fed’s Fisher: Fed has done all it can to support the recovery.” If GS/JPM have a massive short position in Treasuries maybe they will let them crash a bit. Retail investors are big in bond funds I believe. Nothing good is likely to come out of Washington DC and Wall Street.

  • gary leibowitz March 21, 2012, 4:03 pm

    The housing market is a mess but any improvement will show immediate results. The consumer spending numbers bears this out. With a steady rise in employment and a stable housing market (hovering at the bottom), the result can only be a positive.

    Since the financial arena should no longer show any downside surprises, and housing holding its own, there is no reason to conclude an immediate turn around in this rally. On the oil front, which I believe is the greatest risk to this fragile economy, Saudi Arabia is coming to the rescue with the largest number of super-tankers to be delivered to the gulf coast in many years. A 40 day journey that should alleviate oil prices.

    The constant talk of manipulation can only be accepted if you believe the last 3 year rally was manufactured out of thin air. Corporate profits have not seen such a dramatic rise in decades. Economic hardship and profits in the financial world are two wholly different beasts.

    Following the markets for some 30 years, I can’t remember being this bullish. It is at time hard for me to accept given the fact that I believe it will all end very badly. Using the analogy of a canoe floating in calm waters but knowing rapids are ahead followed by waterfalls. At the rate the canoe is moving I can’t see any problems develop for a while.

    A bear that is playing the bull card this year.

    • Cam Fitzgerald March 21, 2012, 4:24 pm

      I like your positive point of view Gary. We have had a very good run despite all the faithless and the naysayers who pray at the altar of Armageddon. Is it any wonder the gold bugs disgust so many people these days? When they relent in the negativity then I will relent too. Until then, the likes of them should all come under close scrutiny. They are a true threat to society.

    • redwilldanaher March 21, 2012, 5:25 pm

      I have to say that yours and Cam’s comments literally sicken me. The reasons should be obvious to both of you. Apparently neither one of you are willing to look into the reality the lies beneath the superficial. It’s one thing to believe that markets can move higher based on the fact that you believe more manipulation and fraud will be the order of the day as it clearly has been but it is another thing entirely to dismiss those with legitimate concerns because they refuse to be fooled by the powers that be. I’ve been one that has believed that this could happen all the while knowing that the foundation that it all lies upon is rotten to its very core but I have to say that when I read comments like these that are essentially cheering on the sociopaths’ plan and dominion over our lives it makes me sick. Apparently the selling of blissful ignorance remains highly profitable even to some at Rick’s.

    • Buster March 21, 2012, 6:13 pm

      …sorry about the typo’s. I should check my wireless keyboard hasn’t failed me yet again before posting.

      Anyway, despite the papering over of the lies with ‘paper’, they do remain, nonetheless. There are always consequences for the patient, as there are with the world now. More wars & oppression somewhere, or just the fact that decent hard-working people go bust while the ruling criminal class of crooks have only to worry about what toys they should buy next with their ill-gotten gains. Always consequences.
      This is of far more importance than which way the numbers on the screen are going to go, in all honestly. Placing more importance to being right in the markets than what is right in the world would make one no better than the criminals who have the blood of generations on their hands.
      …but I do understand the priorities & motives of most of the sheeple, even many here. Many are still free to focus on what they value most & forget what really matters most.
      Without truth & justice for all, there is no real future, as history will no doubt teach us.

    • redwilldanaher March 21, 2012, 6:22 pm

      Sorry Buster, I was watching a great fictional account of reality on CNBC and then got distracted by a Right vs. Left argument over something of little importance. Could you repeat that while I pop open a Vitamin Water?

    • redwilldanaher March 21, 2012, 7:06 pm

      “With a steady rise in employment and a stable housing market (hovering at the bottom), the result can only be a positive.” – Is that supposed to be sarcasm?

    • Robert March 21, 2012, 9:50 pm

      Gary-

      I agree with you in philosophy.

      The agressive propagandish assertions regarding economic recovery, buoyed by bullish psychology in the markets, probably means a bull that will run farther than most beleive over the near to intermediate term.

      The thing I see is that when a market bottoms, and then bounces aggressively, it invariably re-tests the bottom at least once before taking off on the true sustainable uptrend; and this re-test of the bottom ALWAYS requires far more aggressive selling/shorting than the intital bottom did.

      Doesn’t a similar (but inverse) pattern seem to be building in the markets today? The spring 2009 bottom has resulted in a bounce that has not gone un-challenged, but has required a caliber of buying power that has forced governments to debase their currencies to an unheard of extent in order to generate enough buying power to keep the uptrend intact.

      You may be right that it will run for 9-12 more months, but since I can’t see the inflection point, I must assume that it will be somewhere between current levels, and the 2007 top. That is to much risk for me to jump out and run with the bulls . I just can’t see myself riding this roller-coaster any higher… when the crest comes, the roller coaster might be back at the bottom before anybody on board even realizes it rolled over the crest…

      As the roller coaster goes up the ramp, there is that ominous clicking sound, and you never know exactly when the last click will be heard before the ride takes a must more thrilling turn.

      I am sitting on my hands, or very mildly dipping into the positions I want to be in as the roller coaster flies down the other side…

      It’s the only thing that makse sense to me right now, and I have always been more comfortable making sense and losing a little in the short term, than bowing to irrationality as a valid path to wealth accumulation/preservation.

  • John Jay March 21, 2012, 1:44 pm

    As far as home sales in the USA go it is interesting to note that the only thing holding the RE market up is cash buyers, non performing loans being ignored, and 3% down FHA loans. FHA loans have gone from 1 in 400 in 1980 to 1 in 2.5 today. Another tidal wave of underwater mortgage holders and non performing loans that you and I are on the hook for. All to mask the lack of real jobs to support home prices at even current depressed levels.

    • redwilldanaher March 21, 2012, 2:48 pm

      The only other things that I can think of that are holding up the RE market are fraud and lies. Come to think of it, fraud and lies are holding up everything else too. I conclude therefore that fraud and lies are what make the world go ’round.

    • Buster March 21, 2012, 4:02 pm

      Yep.
      The late, great psychologist, M Scott Peck, in his memorable books including ‘The Road Less Travelled’, concluded that the basis of most psychological disorder was the conflict between our conscious mind telling lies, which our subconscious mind, being hard-wired for truth (-rather oddly being that we live in such a corrupt world!) conflicts against causing a niggling discomfort , or conflict within us. He found he could figure out the lie by seeing what the ‘patient’ responded most aggressively to when questioned. If he could get the patient to admit the li t themselves, they normally managed to recover & live happier lives thereafter.
      The larger world is similar to the patient. Ask the wrong questions & get greeted with ridicule & abuse at best, with all hell breaking loose at worse.
      I conclude that, since it’s based on lies backed up by aggressive tactics, then the whole world is clearly sick!

    • Robert March 21, 2012, 9:35 pm

      I’ve just begun reading “Right is Might” by Richard Wetherill. It presents a similar thesis that a healthy mind understands right from wrong as a function of our natural tendency toward self-preservation (Wetherill goes so far as to declare this a law of nature as immutable as the laws of physics); and that the process of willfully choosing wrong over right is what steadily erodes our mental health (both individually and in an aggregate, societal level)

      I find these concepts fascinating, and supportive of my view that right versus wrong is merely a reflection of the power to make healthy, positive and productive choices rather than compromising, unhealthy and destructive choices.


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