Monday, August 30, 2010
The Worst is Over
At the top of this post is an image of the cover of the latest issue of Time Magazine. The chart below the Time cover is a monthly chart of the housing stock index quoted on the Philadelphia stock exchange.
The historical low of the index was reached in March 2009, coincident with the low in the S&P 500. While the S&P 500 is currently trading about 30% below its all time high, the housing index stands 70% below its all time high and much closer to its all time low than the S&P.
The Time cover together with the fact that the housing index is still near the low of its historical range suggests to me that the worst is over for housing stocks. I doubt we shall see a return to all time highs in the index any time soon, but neither do I think the 2009 low will be taken out.
The important point here is that if the housing market in the U.S. can stabilize and recover, then the entire economy will get an extra upward push. This in turn will help lift the gloom that seems to have engulfed the the U.S.A. As the dark clouds begin to disperse the stock market will rally. I still think the S&P 500 is headed for 1300 and above over the next nine months.