In a classic symptom of the "All News Is Good News" syndrome, the equity markets initially popped for about a three-quarter percent gain today. Traders were celebrating the relatively moderate damage endured from Hurricane Rita. But the party died early when oil prices made a comeback, swinging from over a dollar loss to nearly a two-dollar gain. Or, perhaps, Rita just didn't do enough damage to "spur economic growth" as was the misguided belief after Katrina. It seems the size of the post-hurricane rally is proportional to the devastation.
Home builders swung with the market, as well, although on seemingly different news. The existing home sales report came in surprisingly strong this morning. The homeys caught some nice bidding on the heels of the report until it was reported that Greenspan viewed the strong numbers as further proof that the housing industry is in speculative mode. I suppose the biggest concern to housing bears should be that Greenspan is trying to chill the market with words. His efforts at talking down markets usually have short-lived success followed by strong rallies.
Still, the homebuilder charts are in a technically weak mode. It will be interesting to see how housing stocks react to tomorrow new homes sales report. The reaction will tell us more than the number itself and may provide us with a clue as to how weak this weakness will get.
Likewise, broader market charts are starting to break down. The Nasdaq is showing a little more weakness than the S&P, as it did earlier this year when we witnessed the spring meltdown. But this year has been full of false breaks in both directions, so we wait for clearer signs.