Meant to post this yesterday!

Hey what do you know, a little green on the screen!  Case Shiller Home Price Index painted the screen with an improvement of 1.2% while the year on year figure was down 11.3%.  The number were a bit better than consensus, showing signs of stability creeping back into the housing market.  17 of the 20 market surveyed showed positive price improvement with Charlotte, Las Vegas, and Cleveland the only decliners.  Although the numbers are good, uncertainty with the 8K stimulus plan and continued high unemployment will need to be monitored.

Consumer Confidence was also released, down nearly 7 points to 47.7, well below the 53.1 economists were expecting.  The devil was in the present situation component which fell 2.3 points, its lowest level in 26 years.  Consumers and their view on hard to get jobs provided an addition drag.  Even with Consumer Confidence being a volatile index, the future of our economic recovery depends on a healthy consumer, one that has a job and a little “ching” in their pocket.

Just out, the 44 billion 2 year note auction was “dead solid perfect” ( Randy Quaid 1988).  Bullet yield of 1.02%, 44.5% taken by the indirect bidders, and a 3.63% bid to cover gives this one a grade of A.  Bonds like it, stocks don’t.  Currently, the 10 year note has returned from the abyss, up 18/32’s to yield 3.48%.  MBS has widen a touch to treasuries but have gone along for the ride, up 6/32’s.  Stocks have given up their gains, currently off a point or two.

Technically, the chart has taken out the down trend line, putting at least a temporary bottom in the market.  However, we view this as a counter trend rally in a longer term bear market.  In other words, until the market can prove itself, this is a correction and should be sold.