One need only glance at the front page of the local newspaper for a sense of how things are. The Baltimore Sun recently featured an above-the-fold article which said that the median size of a new single-family home was smaller for the first time in 14 years. Since 1991 larger houses have “mirrored the housing bubble and good economic conditions,” we’re told. Additional investigative journalism uncovered other nuggets, such as “when the economy is weak, unemployment is high… and people tend to focus on less expensive things.” The following chart tells the story:
This appears to be a change in trend. The economic internals lend support to this view. More people are out of work. The house-as-ATM is a thing of the past. Credit continues to be tight. Spending is down. These indicators all argue for a contraction of the very housing market which drove the economic expansion of the early 2000’s.
A Labor Day drive thru the countryside in Northern Maryland revealed dozens of houses for sale. The owners probably want higher sale prices than they will get. Ask any of them and they’ll say something like “I can’t take a loss”. They feel entitled to a profit on their “investment.” Imagine that notion applied to stocks. (Actually that’s not far fetched, but it’s another conversation.) And houses weren’t the only thing for sale. Cars with too-high prices sprayed on their windshields, farm equipment, even a telephone pole! It seems like our country has become a giant yard sale.
The stock market rebound since March counts well as a Primary Wave Two. In Elliott Wave analysis of wave two personality in a bear market, this means investors are thoroughly convinced that the bull is back. Aggressive euphoria and denial abound. This compliments the talk of “recovery” that dominates the noise of what passes for news.
This macro look at housing and stocks reflects how we view the markets and economy through the lens of the socionomics and Elliott Wave Theory. An understanding of the Elliott Wave Principle comes in two stages. The first stage is to accept what the wave principle is and what makes it work. This can happen quickly. The second and more difficult stage is to learn how to count waves. This can take months or years and demands a lot of self-discipline. Not many do it with consistent success.
Whether you trade stock indices, currencies, or commodities, we believe we can help. Our analysts offer years of experience counting waves. They present them to you in real-time charts in all time frames – giving you tradable information you can use. Read more: