Consumer Confidence Day

by Larry Levin


Today's economic data points were the Case-Shiller home price index and consumer confidence. Both were very weak.

The Case-Shiller home price index tracks housing sales and prices paid in 20 major cities across the country. This index fell a record 2.4% from December to January, the 18th consecutive decline in prices. For 10 major cities, prices fell 2.3% in January and 11.4% for the past 12 months. Overall, however, these major U.S. metro areas have plunged a record 10.7%.

"No markets seem to be completely immune from the housing crisis,' said David Blitzer, chairman of the index committee at S&P. Home prices in 10 of the 20 cities have fallen at double-digit rates in the past year.

Falling prices have eroded Americans' wealth, cutting into their ability to borrow against their home, refinance or to sell for a profit. Millions of Americans now owe more on their home than it is worth. And as mentioned yesterday…Prices must 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. In fact, many economists expect prices to ultimately fall about 30% from the peak as measured by the Case-Shiller index; they are now down 12.5%.

"Clearly the housing market will exert a severe drag on real output in the first half of 2008, and tighter credit conditions overall are expected to have a dampening effect on other big ticket purchases, such as automobiles and household appliances," wrote Brian Bethune, chief U.S. financial economist for Global Insight.

That's bad news alright, but nothing in comparison to the consumer confidence data. Ok, everybody ask in unison, "How...bad…was...it?" The Conference Board reported that consumer confidence plummeted in March, while expectations hit a 35-year low on pessimistic views of the business climate, job market and personal income. The expectations index hit its second-lowest level ever, falling to 47.9 in March from 58.0 in February. It was only worse in December 1973, when expectations were at 45.2.

If current consumer confidence levels hold, Ian Shepherdson of High Frequency Economics sees consumer spending dropping to an on-year rate of negative 2% in the near future. "If spending does weaken to that degree, an outright recession will be unavoidable and a severe recession will be very likely," the head economist wrote to clients. "In short, this is one of the most alarming economic reports we have seen in this cycle so far."

Luckily for Wall Street this report was released in Ancient Hebrew and was unreadable. Shortly after it was released, the Dow exploded over 100-points higher.

It's like I said yesterday...”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 - 1,410.00 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: 4/10/08

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


1) VA buy @ 8:35am at 1349.50 = -1.75 & -1.75

2) VA sell @ 10:00am at 1350.00 = +1.50 (1 lot)

3) VA buy @ 10:40am at 1350.00 = -1.50 (1 lot)...-3.50 points

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


1) Sell @ 9:04am at 698.4 = +.7 (1 lot)

2) Sell @ 9:08am at 698.6 = +.5 & -1.3

3) Sell @ 9:30am at 698.7 = +.4 & +2.0

4) Buy @ 10:19am at 699.2 = +.5 & +1.5...+$430


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