Housing Bottomed?

by Larry Levin

What a rally! The S&P futures popped 26.90 today, while the Dow Industrials were good for +187.32. The early move was due to a new bid for Bear Stearns (are contracts honored any more?) and better than expected housing data.

The major indexes extended their early gains after the National Association of Realtors reported sales of existing homes in February rose for the first time in seven months.

Resales of U.S. homes and condos rose 2.9% to a seasonally adjusted annualized rate of 5.03 million, ahead of the 4.85 million pace expected by most economists. It's the strongest sales pace since October...but sales are still down a whopping 23.8% compared with a year ago.

"There's a glimmer of hope that just maybe the bottom in housing is right around the corner," said Paul Nolte, director of investments at Hinsdale Associates

A "glimmer of hope" at best, in my opinion. In order to reach a slightly better than expected sales number, prices had to drop - a lot. The median sales price plunged to $195,900, down 8.2% from a year earlier, the largest price decline recorded since the Realtors began tracking both single-family homes and condos in 1999. Prices of single-family homes fell 8.7% in the past year, also the most since the records began in 1968.

Prices have to come down to become affordable again, but be careful for what you wish for: Mr. Market has an odd sense of humor. Plummeting home prices will bring a larger level of foreclosed homes in the near future, as people who are upside down on their mortgage will walk away in droves. And that isn't going to help the credit crunch at all.

But that will be news in the future - there are shorts to be run out of the market for now. I believe the S&P will be trading in the 1,400.00 - 1,407.00 range before this or other potentially bearish news will affect the market again. This week is also the end of the 1st-quarter, which usually leads to buying right up to Friday. And who can blame the mutual funds? They need to goose their returns, even if it's just temporary, for a more affective marketing campaign.

Real Time Trading Signals*for

Trade Date: 3/24/08

E-Mini S&P Trades*
(before fees and commissions):

1) B/away buy @ 8:35am at 1337.00 = +1.50 & +5.00

2) Pivot sell @ 9:10am at 1354.00 = +2.75 (1 lot)

3) OTF buy @ 11:00am at 1354.25 = +2.00 (1 lot)

4) TP buy @ 1:00pm at 1358.00 = -1.50 (1 lot)

5) FT sell @ 1:15pm at 1357.50 = -.50 (1 lot)

6) FT sell @ 2:15pm at 1355.00 = b/e (1 lot)...+9.25 points

E-Mini Russell Trades*
(before fees and commissions):

*** No ER trades today.


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