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It seems like forever ago but 6 months ago we were calling for:

A)    a MEGA Squeeze in Consumer Discretionary

B)    a Q2 Bottom in US Housing

Over the past month the Consumer Discretionary (XLY) has been the second best performing sector rising 9.3%.  Within the XLY, Home Builders and Household durable names have been the best performing names within the index.

Yesterday’s new home sales data and now the data from Case-Shiller provide some economic support for the move in the XLY.  The S&P/Case-Shiller home-price index dropped 17.1% year-over-year, the smallest drop in nine months.  The index increased from the prior month for the first time in almost three years. According to Bloomberg, consensus forecast suggested the index would drop 17.9%.

Helping to moderate the decline in home prices is the fact that distressed properties account for a smaller share of those sales.   In three out of the last four months, the index has seen a sequential improvement in moderating home prices. 

Stocks, fortunately, have discounted a lot of this news. They don’t care so much for the Rear View.

Howard Penney

Another Rear View Reality - shiller1

Another Rear View Reality - shiller2