Disappointing housing numbers may have set the tone for early week trade. Tuesday’s housing starts and building permits disappointed economists who had been looking for higher numbers.1
At this point the earnings may help, but the market is starting to look more than a little vulnerable. Fresh nerves could abound following such milestone-making gains in the market.
In addition to the lower than anticipated housing data, stimulus programs are among the topics of discussion which may rattle some resolve. Cash for clunkers is obviously behind the market at this point. Any retail action in the months to come will have to depend solely on consumer needs and wants rather than incentive programs. Despite hopes that some key programs and initiatives may be extended (namely unemployment benefits and homebuyer credits), stimulus from the government could be running dry. This kind of negativity and uncertainty might spark another round of selling.
Another key point to address remains the investors who have hung on since the Dow fell through 10,000 last year. At this point they are beginning to see opportunities to exit at a breakeven level. Doing so could provide a catalyst for a bout of selling pressure. Psychologically, the 10,000 level could prove to be a little harder to hold onto than anticipated. On the S&P, reaching the technical milestone of 50 percent retracement level from the lows could deliver a sell signal to some investors who still believe we are in a bear market. Alternately, topping 1120 could be viewed as a point of confirmation for the bulls.
1 http://online.wsj.com/article/BT-CO-20091020-709265.html
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