Monday Mid-day Nerves

existing home salesMonday opened up with yet another strong green day of trading, mostly reacting to yet another positive month of existing home sales. An increase in sales from the prior month brings no surprise, when considering the amount of bank owned properties that are currently on the market, which are being sold for extreme discounted prices. However, as the trend tends to be as of late, anything positive begets positive trading, at least for now.

There have been a few people who have asked why I haven't made more trades the past month. The very simple answer to the question is because we are not in a logical trading market at this time. I have always said that I am not a "day trader." There were recent times where I saw benefit to making quick, daily trades to take advantage of volatile swings, however, we have changed a lot since then. I believe there is plenty of opportunity in the future for much less riskier plays with a lot more upside. Sure, it may seem boring to the active trader, but it has not failed me yet. So, I apologize for those looking for a more active trader. I will continue to give my commentary on calculated plays that interest me, but until I see a deflationary trigger (which could be very soon), the portfolio will remain pretty status quo.

After the big green morning, the market has taken back all of its profits and is actually, currently, slightly trading in the red. With the so called "positive" home sales news, came some other data that doesn't have such a positive light. With the number of home sales increasing, the inventory actually rose more, which is discouraging, given the amount of distressed, foreclosed homes that were sold. With all of this, home prices continue to go down, which is not a good outlook, when considering an increase in sales.

This being said, reality has sunk in a bit today and could easily head into close, pending there is no intervention. So watch out for a selling close. An industry I see prime for shorting at this point is the autos. Due to the recent closing of the popular "cash for clunkers" program, buying a vehicle almost seems like an annoyance, more so than a luxury. I can't see auto companies making strong profits to close out the year, especially without Uncle Sam sparking interest with incentives.


  1. Anonymous Says:

    FF, can you elaborate a little bit as to why deflation may be imminent? I see such mixed messages lately regarding inflation vs. deflation, some would say that we are primed for inflation. I believe you have previously said that we would se deflation followed by some pretty steep inflation.

  2. Godiva Says:

    Oh this is my first time leave any comment in your blog. But I have been read your website for the past 6 months. Your opinion is great and I feel the same in most of the way. But what leave me in mist is when is this so call bear market rally will end? It took so long as I start to believe the economy is really getting heal!

  3. Anonymous Says:

    This is beginning to look like the start of a new bull market to me, no longer a bear market rally. There will be pullbacks in sept / oct (as much as 10% I think), and these will provide good opportunity to get long, for those who are still 'on the sidelines', based on the misguided advice found daily in this blog. Its a shame... Look at the S&P500 since march to see what you've missed out on.

    There will be hell to pay for 'bailout mania' eventually, but that's way out in the future. For now - get long and make some money.

  4. Finance Fanatic Says:

    Sure hindsight is 20/20, and many people during the 1930's road the market back up on its 50% rebound and were balking at those who sat that round out. As we saw from that scenario, those profits were taken back so quickly, most people couldn't get out. This is my fear and although I haven't capitalized on this "bear market rally", there will be plenty of better calculated buys. You might as well go to Vegas with the antics that are going on in the market.

  5. Anonymous Says:

    My belief is that comparisons to the 1930's are completely irrelevant in this day and age.

    1) You can be sure that the people leading this bailout and 'manipulated rally' have studied that timeframe and learned from the mistakes

    2) I don't think there was on-line trading in the 30's (could be mistaken, I guess). All you've got to do is figure out how much you're willing to lose before you buy and set your stops accordingly. As always, some work out and some don't. Nothing to be afraid of.


    Lots of homes on the market.