The Bleeding Edge of the Market Downturn

Two of the sectors that failed to make highs along with the major indexes in June are now trading below their May highs: banks ($BKX, top chart) and homebuilders (XHB, bottom chart). It is difficult to imagine a sustained, vigorous bull market when the financial system and housing are not inspiring investor confidence.

Comments

[Larry House:]

Very true.

Jun 17 01:11 PM

[DizzySailor:]

Pay no attention to the man behind the green curtain. Here in OZ the recovery is an individual thing and not dependent on the masses. Just like the old days.

Jun 17 03:23 PM

[long roh:]

Could the reason for the present lag be that those sectors ran up much more in May than the rest of the market? (They did.) I don't think you can infer much about future prices by comparing the current price to the May euphoria of "the-world-is-not-endi... While a housing recovery is a necessary ingredient, there is some convexity between the housing market and homebuilders insofar as the housing market as a whole could recover without homebuilders profiting greatly. Similarly, conservative banking might not yield the same heady profits that reckless lending (temporarily) did, but the economy might still recover.

I'm not making a call in the opposite direction, but I would discount this entrails-based observation.

Jun 17 04:03 PM