Tops and Bottoms

Calling a top to this rally is just as stupid as calling the bottom. And although it doesn't seem like this rally will end, I know it will. It's just a matter of time, and market sentiment. While its clear I have to idea when the rally will top or when market sentiment will change (as indicated by my 100% bearish slant), I do know that history shows that just because we rallied 25% does not automatically mean our market has bottomed.

Time for my favorite chart:



The enormous government action has undoubtedly turned sentiment positive. And even certain economic indicators have begun showing slight gains. Although, i do think it is a step in the right direction, we are coming off horrible jan./feb. statistics, and a slight uptick in home sales, for instance, is not a trend, or indication our economy has bottomed.

For instance, in Florida, I have noticed an increase of pending home sales. But at the same time, I have noticed increasing inventory and no stability in housing prices. For example, if a house closed for 150K in a specific neighborhood in March, there are still 5 others just like it for sale for 150K in the same neighborhood at the present time. This shows me that people may have started to dip their toe into the water to buy homes, but there is NO GROWTH. NO APPRECIATION.

In addition to housing inventory, housing prices must also battle a collapse in the rental market. Landlords are just now coming to grips with the affects deflation has on their rental rates, which I think will keep housing prices low for an extended period of time. I think this story has yet to be told.

Without growth, without appreciation in asset values, our economy, our market will not continue the current V shaped patten upward.