The Dow fell a mere hundred points yesterday – an amazing show of strength, considering the disturbing tenor of the news. For starters, it was reported that existing-home sales for March fell by 2%, pushing the median price down to $200,700, or 7.7% less than a year ago.  On the energy front, the price of a barrel of crude set another record, closing at $119.37 a barrel. Airline stocks were in a state of collapse as a result, with the shares of UAL (shown in the chart below) and American Airlines in particular suffering devastating losses. Meanwhile, the Dollar Index was extending its losing streak, hitting a new all-time low versus the euro.

Under the circumstances, we might have expected the Dow to fall by at least 500 points. Instead, it was off by just 100, and a few of the stocks at ground zero, such as Citigroup and Merrill Lynch, actually eked out small gains. This suggests that the bear rally begun in late January still has some life left in it.  Whatever the case, cyclical forces that have been holding an avalanche at bay in recent weeks appeared to be a more powerful influence on investors yesterday than any bad news that may have crossed the tape. Wall Street’s mellow attitude reminds us of the old saw, that if you can keep calm while all those around you are panicking, then you probably don’t understand the situation. This would appear to be true in spades right now, given that the Dow is within 12 percent of record highs and continuing to hang tough against recession, a real estate collapse and a dollar headed toward oblivion.

One further, disquieting item that got shoved off the front page yesterday concerned a leap in California foreclosures to their highest level in more than 15 years. Lenders sent out 113,676 default notices in the first quarter, up 39.4% from the 81,550 sent out the previous quarter, and up 143.1 percent from the 46,760 sent in the quarter before that. Our friend and fellow deflationist Jas Jain comments as follows:  “Since the credit crisis began in August 2007, home prices (on a price/square foot basis) have been steadily dropping at a 20%-40% annual rate, depending on region. There could be some leveling off in prices for few months before the second leg takes prices down more than 50% from their peaks in most areas by year-end. California has been in recession since July 2007 (based on employment data) and should enter an economic depression in 2009. The Housing Bubble kept Silly.con Valley out of the depression after the tech bubble burst, causing employment to fall by 20% in 2001-03. (That is a depression by any definition). This time there is nothing to save the California economy.”

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Hidden Pivot Seminar May 21-22

Because seats for the recent Hidden Pivot seminar were nearly sold out, I’ll be offering the course again in May – on May 21-22, from 6 p.m. to 9 p.m. Mountain Time.  Click here, and then on the “Upcoming” tab to register;  or here if you would like more information as well as a detailed description of the Hidden Pivot Method and a free Hidden Pivot calculator (our latest model, perfect for beginners). 

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Free Pass to Rick’s Picks Chat Room

The Rick’s Picks chat room is the place to be if you’re looking for tradable ideas in real time.  Gold and silver traders in particular can benefit, since the room attracts experienced traders from all over the world at all hours of the day, particularly during U.S. market hours. If you would like a free one-day pass to check it out, click here, and then on the green banner.