Stocks found their levels in the first hour of trading, and haven't moved since. Perhaps all the big players have taken their Labor Day vacation early, perhaps it's some technical resistance, or perhaps it was today's existing home sales.
Existing home sales dropped 3% in July to their lowest level in seven months. That raises concerns that the housing market is starting to slow faster than anticipated as the psychological affects of a slowing economy start to take their toll on consumers. While today's numbers aren't great, existing home sales are still 7.3% above last years level, and the median home price is up 5.2% to 150,800.
DJ Home Construction Index
Home building stocks, as measured by the DJ Home Construction Index (DJUSHB), are also well above last year's level, but have had a rough summer. Since the July high, the index has dropped 14%. Already below the 50-day moving average, the Home Construction Index is now testing the yearlong up trend, and 200- day moving average. The 50% retracement at 215 did a good job of supporting declines at the beginning of this year, and may be called on again. Perhaps it's just some money rotating out of these stocks, but from an economic standpoint this is one sector that needs to hold up.
If consumer psychology is in fact being tested they are going to have to deal with a gloomy outlook from Manpower. The staffing agency reported that only 24% of employers intend to add jobs in the fourth quarter, and 11% plan on cutting jobs. We shall find out how rattled the consumer is when we get consumer confidence numbers tomorrow.