U.S. Existing-Home Sales Rise in May Sales of previously owned U.S. homes increased in May, a sign of solid demand during the housing market’s spring selling season in the face of fast-rising prices and tight inventory.
Existing-home sales rose 1.1% in May from the prior month to a seasonally adjusted annual rate of 5.62 million, the National Association of Realtors said Wednesday. Economists had expected a modest decline from April. Compared with a year earlier, sales were up 2.7% last month. (…)
The median sales price in May was $252,800, the highest nominal level on record and up 5.8% from a year earlier. There was a 4.2-month supply of homes on the market at the end of the month, based on the current sales pace. Inventory has declined on a year-over-year basis for 24 straight months.
The median property remained on the market just 27 days in May, the shortest time since the trade group began tracking the metric six years ago. (…)
The action remains centered in the South: (charts from Haver Analytics)
Inventory is down 8.4% YoY (chart from CalculatedRisk):
Gasoline demand is still weaker than it was last year in June.
Not a sign of economic strength.
- Prices at the pump are set to drop in coming weeks. That will help consumers:
Technical stuff from Financial Sense:
(…) Other warning flags can be found in the realm of technical analysis where sentiment readings are among the most bullish values seen in a number of years. These suggest that there is room now for a contrary stance where excess positive sentiment tends to be an especially powerful indicator in the latter phases of an extended cycle. In our work, we also note that while overall breath is still reasonable when viewing composite advance-decline data, lately, there has been a marked drop-off in volume. Volume is the fuel and lifeblood for bull markets and volume tends to be highly coincidental and even leading a bit at key turns.
In the chart [below], we show our S&P 500 proxy in the top clip and cumulative up to down volume in the lower clip. Over the last few weeks, as the S&P has moved to new all-time highs, the up-to-down volume ratio has been lagging and unable to make new higher highs. This is behavior that on the whole looks a lot like that seen in the middle of 2015 leading into the July highs and preceding the August China devaluation decline.
Above: Up-to-Down volume failed to make new highs at the double top peak in 2007-2008 and the breakdown below long term moving averages by volume in 2008 confirmed a directional shift into a bear market.
Above: Similar behavior was also seen at the big turn in the equity market in early 2000, just as the NASDAQ bubble began to crumble.
Above: The ARMS Index (inverted) for the broad market is now back to intermediate term overbought values and showing a bearish divergence with prices. This is a strong caution signal.
In the same vein, the ARMS Index, or TRIN, is a gauge that employs the combination of both advancing and declining issues in addition to up and down volume. A ratio of a ratio, the ARMS Index tells us how much selling pressure is taking place on the stocks that are going down, versus how much buying pressure is taking place on the stocks that are moving up. When there has been a long-standing absence of selling pressure in the equity market, ARMS moving averages tend to decline and become very low. That has been the case over the last few weeks, as ARMS Index moving averages have declined back to overbought levels.
In the chart above, we plot the ARMS Index for the broad stock market inversely so as to make the indicator easier to understand visually. Note that recent readings show the gauge back to the high end of the range, fully overbought, and showing a negative divergence against price. This is usually a pre-condition for an important market top. (…)
Above: Semiconductor stocks with Inverted ARMS, also extremely overbought. Note that this gauge is also diverging in bearish fashion as prices made new all-time highs.
Above: Semiconductor Stocks with Intermediate Advance-Line Ratio at record overbought values.
Above: The expanded list of FAANNG Stocks, Facebook, Apple, Amazon, Netflix, NVIDIA, and Google are also at record overbought readings and are diverging amid a near vertical run.
Above: NASDAQ 100 Index with rising channel and RSI. So far, the rising channel is intact but the recent break has wounded upside momentum. This is a serious warning that the larger uptrend is now exhausting.
Overall, we would look at the weight of the technical evidence and conclude that the sharp technology stock led decline feels like an early warning of a larger trend change getting underway. We want to be clear, that tops are often a process, and therefore, we would not be the least bit surprised to see both the NASDAQ Composite Index and the NASDAQ 100 (symbol: NDX) Index move back up and make new somewhat higher highs in the days just ahead. That type of behavior would form a potential double top which is a very common type of primary trend reversal pattern. The key to concluding a double top would be that following another round of new highs, the key tech names are then unable to hold those levels and, subsequently, prices begin to trail off and move down to new lower lows. A break down to fresh new lows would then be a significant sell signal and a warning that the long bull run of the last 9 years had finally peaked. (…)
Some GOP Senators Hold Back Support for Health-Care Bill At least a half-dozen GOP lawmakers are expressing reservations about the bill. Some conservative senators are saying the bill doesn’t repeal enough of the Affordable Care Act, while GOP moderates are balking at steep cuts to Medicaid.
Sticking Points Slow GOP Budget Efforts House Republicans are struggling to agree on a plan to fund the federal government for 2018, a critical task that they must tackle before moving ahead with ambitions for a tax overhaul.