While mixed Ifo index and better-than-expected claims more less balanced out each other, used home sales data was way below expectations. The sales fell to 5,1 million in annualized terms while the market expected a rise to 5,35 million. It needs to be underlined, that in historical terms, the current level of used homes sales per household is not particularly low. At 4,4% it is clearly below the levels recorded earlier in this decade, but then again its above the 40-year average. If we assume that high pre-crisis levels were mostly due to excess credit, one should not expect a brisk rise in those numbers this time. This is a fundamental story. The market story, however, is that indices were close to the maximums and even a small flaw is a good opportunity to get some cash from the table.
So far, the move looks more like a small profit taking rather than a more serious correction. Contracts for the S&P500 slid from 1076 pts. to 1040 pts., precisely using Augusts highs as a support level and bouncing back a bit in Asian and early European trade. A solid support at the moment seems to be around 990 pts. Whether we are going to head there may depend on the second part of home sales report – new home sales. The report is (or at least was) expected to show another rise in new homes sales, to 440k from 433k in July. That would be the fifth consecutive improvement. In this case it is well justified and needed. New home sales per household ratio crashed to less than 0,3% early this year – less than at the bottoms of oil crisis and the recession of early 80-ties. Again, taking into account an improvement from previous months a one month pause wouldn’t be a tragedy here, but for stock market bulls it might be too much to bear.
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Przemysław Kwiecień  |
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