Bad News/Good News

The market kind of started out good and then the housing report came out. No surprise that the housing market is cooling. Home prices actually took their first drop in 11 years. So now the real estate experts all say they expect prices to drop for several months while the excess inventory works its way through the system. The question now becomes, will the lower mortgage rates cause people to pick up the pace of purchasing taking advantage of reduced prices and rates to absorb the excess inventory of houses faster then it would otherwise take? Does this mean there will be a lot more talk about hard or soft landings? Well, one thing’s for sure, the lowered housing prices will almost certainly help reduce the inflation rate.

But around noon the market stabilized and started heading north. What gives? The market seems to be looking at the hard versus soft landing question. The Fed stated that they were concerned that there may be inflation in the system, but the market has looked at the recent fall in the price of oil, gold and other commodities and now the drop in housing prices. The market is basically saying that inflation is becoming a non issue which will allow the Fed to move a little earlier on lowering interest rates to head off a recession. The net effect is the market thinks there will be a managed slow down not a full blown recession.

I think it’s kind of interesting to see that the markets initial reaction is negative and then they look harder and see some positive. I think this goes a long way to gauge the mood of the market. Maybe the market participants want to see a rally. Maybe they would like to see the Dow in record territory. Then the public will come enter the market in droves setting us up for a nice bubble to burst.

CLRK is now up 2.14% to $16.67 while SCUR has cleared the psychological barrier of $7.00 and is currently sitting at $7.15.