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US Stocks: Housing Data Helps; Housing Data Hurts
What the...?
In theory, fundamental market analysis should run as smoothly as a cement truck. News items gush forth from the media "mixer" and dry completely solid into a bullish or bearish mold over a market's prices.
In reality, however, it acts more like a tube of Play-Doh: News items plop onto the mainstream table and are constantly "remodeled" to conform to changes in a market's prices. Worse part is -- there's no way of knowing what "shape" a piece of data is going to take from one minute to the next.
Case in point: the July 27 Commerce Department report on New Home Sales. Here, the following online accounts show how this single news item is squashed and sculpted into several forms:
- Before 9 a.m. (EST), Bullish: "Stock futures point to higher Wall Street open. Investors await the Commerce Department report on new home sales in June, which likely rose 2.3% from May. (AP)
- 10 a.m., Bullish: The government report is released and shows a stronger-than-expected 11% gain in June sales, the biggest rise in eight years. "This underscores evidence that the deepest housing slump since the Great Depression is starting to stabilize." (Bloomberg)
- 10 a.m., Bullish: "Wall Street Gains After Housing Data" (Reuters)
10 minutes later, the horns and hooves of that clay mold were refashioned into rounded ears and paws. To wit:
- "Wall Street Opens Weaker. An unexpected increase in new home sales gave Wall Street a shot in the arm, but just for a few minutes." (New York Times)
- "Bulls Back Playing Defense. The [Commerce] report is subject to sizable revisions, large sampling, and other statistical errors. It can take up to five months to establish a new trend in sales." (MarketWatch)
Any questions?
Here's the thing: While the usual suspects try (and fail) to mold the outside data to fit price action that has long since been underway -- our analysts remain one step ahead of the biggest turns, before they take place.
On this, the following recap of past publications sets the record straight:
Timing: One week before the U.S. stock market landed at its 12-year low of March 9, our February 27, 2009 Short Term Update utilized a specific turning pattern to outline a specific time window for the onset of a major upside reversal. In STU's own words:
"By all indication, this pattern is back on track... the turn will come on or near March 10, 2009. Anywhere in this time period may mark a turn, which will obviously be a market low."
Elliott Wave structure: Once the bullish winds of change had turned, the March 16 Short Term Update wrote:
"When the market speaks, it behooves us to listen. The implications of this are that the... major stock indexes are in the initial stages of a multi-month advance."
Sentiment: Soon after, the April 2009 Elliott Wave Theorist filled in the final panel of analysis and wrote: "The rally should regenerate substantial feelings of optimism"