The market is still making new highs. But do you know when the housing HGX topped? Wait, before you answer that, do you know when housing topped in relation to the financial crisis?
Lost in all the complacency and euphoria is the fact the HGX already topped on Feb. 26, which was 133 trading days ago. Obviously if we consider calendar days it would be a lot more.
The reason I bring this up is the red power bar from last Wednesday. That really poured cold water on the rally. If I drew a connect the dots trend line across the 2 previous highs this leg up only projects to about 206 which means the high for this year is likely safe.
Now I’m going to show you what happened last time markets topped. The top of the market was October 2007. Do you realize the housing top was July 2005? That’s almost mind boggling. Okay, we are comparing apples to oranges. If we throw out 2005, the housing sector topped in February 2007.
Still think I’m setting you up? Okay, let’s look at the BKX. That one topped right on March 21st, the Gann master timing window for the whole year. It’s one of the few indices that basically topped at the 261 week mark (give or take) of this rally off the 09 bottom. So these time windows of ours really do work given the market’s best attempt to laugh them off this year.
Why are we having this discussion? So many out there are so complacent about these markets they fail to realize two of the most important drivers of the economy and the sustainability of a bull cycle have been diverging from these highs for months already. While it’s not as severe as 2007 it’s noteworthy. It’s also noteworthy to realize the sequel rarely equals the original unless we are talking about Spider Man or the 1973 Miami Dolphins. Yeah, in case you don’t know that second Miami Super Bowl team that lost 2 games was better than the original team that is in the history books as the only unbeaten team in NFL history. How do I know? I was there.