The Recession is not over. Is the Housing Recovery sustainable looking at the Case-Shiller Home Price Index, and the first time homeowner tax credit? Worrisome Daily Charts.
The Recession is not over
Even if Q3 Advanced GDP comes in at +4% or so, the National Bureau of Economic Research (NBER) will not likely be calling the end to this Recession any time soon.
Keep in mind that according to NBER we have been in Recession since the end of 2007 even though GDP did not peak until Q3 2008 at $14.55 trillion.
One or two quarters of positive GDP should not be viewed as recovery given Consumer Confidence at 47.7 well below the 90 to 120 neutral zone, and given hours worked with a 33 handle.
The NBER will put significant weight to recovery on job creation, and this economy is not generating jobs. The Recession is not over when the Present Situation reading of confidence is at a 26 year low of 20.7.
The idea that a single quarter of positive growth ends the Recession is ludicrous. The National Association of Business Economics (NABE) is wrong as 34 of 43 economists say that the Recession is over.
Even Fed Chief Bernanke said recently, “From a technical perspective, the Recession is very likely over.” Gentle Ben will be wrong again!
Since President Obama was inaugurated the US economy lost an additional 3.4 million jobs in an environment where his financial team of geniuses says that stimulus is saving or creating jobs.
Is the Housing Recovery sustainable? Let’s look at the Case-Shiller Home Price Index
The 20-City Index shows a decelerating year over year decline of 11.3% in August with seven months of improved readings thanks to the $8,000 first time home buyer tax credit. Peak to date home prices are down 29.3%. Peak to low prices are down 32.6%.
The Index base value is 100 in January 2000 and a reading of 150 equates to a 50% appreciation since then. To me this indicates that if the $8,000 sunsets at the end of November, and as foreclosures rise, home prices may not have bottomed. Time will tell, but even if the $8,000 is extended to end in March or April 2010, the window from contract to closing is widening, and is now 60 days and longer.
The Daily Charts for Transports, Russell 2000 and the SOX – Charts Courtesy of Thomson / Reuters
The daily chart shows Dow Transports well below 21-day and 50-day simple moving averages at 3868 and 3836 with monthly support at 3615. A close this week below 3794 shifts weekly chart to negative.
The daily chart shows the Russell 2000 is also below 21-day and 50-day simple moving averages at 605.77 and 595.81 and is below my monthly pivot at 589.03. A close this week below 313.74 shifts the weekly chart to negative.
The daily chart shows the SOX below 21-day and 50-day simple moving averages at 321.60 and 316.65 and a weekly close below 313.74 shifts the weekly chart to negative.
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That’s today’s Four in Four. Have a great day.
Chief Market Strategist
Chief Market Strategist
As Chief Market Strategist at ValuEngine Inc, my research is published regularly on the website www.ValuEngine.com. I have daily, weekly, monthly, and quarterly newsletters available that track a variety of equity and other data parameters as well as my most up-to-date analysis of world markets. My newest products include a weekly ETF newsletter as well as the ValuTrader Model Portfolio newsletter. I hope that you will go to www.ValuEngine.com and review some of the sample issues of my research.
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