Housing Sector Beat The Bulls Back Down

FUNDAMENTAL ANALYSIS
What was shaping up to be a great day in the markets in the morning got beaten down by 1pm to end the Dow only 37.06% down. The bulls were active all morning until a confidence survey compiled by the National Association of Home Builders unexpectedly slid three points to 30 in May, matching the 15-year low set last September. Investors have been waiting eagerly to see even the slightest signs of recovery in the housing sector and were disappointed again. A weak housing sector affects many industries across the board including the financial sector. On the high side, the CPI numbers checked in favorably again at 0.2%, pulling the year/year rate down to 2.3%, which is closer to what the Feds like. We are in a market which is extremely sensitive to rate related news while bathed in ever weakening fundamentals. There will definitely be more room to upside due to inflation coming under control... but something really needs to be done in order to ensure that the economy does not slide into recession...

TECHNICAL ANALYSIS
A clear and long "Shooting Star Signal" was formed today on the Dow. A Shooting Star Signal is a candlestick signal with a small body at the bottom and a long tail on top. Such a signal is formed when the stock goes up really high during the day and was beaten back down by the end of the day, signifying that the bears are taking charge. Where does a shooting star go? Down of course. A shooting star this high up in an overbought rally on a volume surge is an extremely strong bearish sign. In fact, it's reverse cousin, the Dragon Tail Formation on 14 March started this rally. If I see deterioration tomorrow, then it definitely is time to get out of my delta neutral standing and get into the bear mode. However, I do not yet see a sustained bear trend coming to be yet. The Dow could test the 13300 level in the very near future, which incidentally happens also to be the 30MA level, making it an important level to hold support. Let's see what happens next.

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