When, for example, price moves higher against generally negative news, that’s bullish for the thing we’re analyzing. And, of course vice versa, when price declines against a positive backdrop that’s bearish. 


Or you could simply say, when price deviates from what general sentiment would dictate, pay attention!


Take mortgage applications for example: Let’s say mortgage rates declined notably and we saw no pickup in mortgage applications, that of course would be a bearish signal with regard to housing. 


Well, we’ve seen mortgage rates decline of late, and, lo and behold, we’ve seen mortgage apps rise in response (especially last week!). That’s as it should be, and suggests that the U.S. consumer remains in decent financial shape!


Here’s from Econoday this morning:

“Mortgage activity soared in the January 11 week, with purchase applications for home mortgages rising a seasonally adjusted 9 percent from the prior week to the highest level since April 2010 and applications for refinancing increasing 19 percent to the highest volume since March of last year. Building upon the prior week’s surge, the weekly increase put unadjusted purchase applications 11 percent higher than in the same week a year ago.” 

To add a little fuel to housing’s fire, homebuilders — after a general souring of sentiment throughout last year — have grown a bit more optimistic of late:


From the same source this morning:

“Mortgage rates have been coming down and are likely giving a boost to the nation’s home builders whose housing market index, at 58 in January, posted its first increase since October and only its second increase since May last year. The result is 1 point better than Econoday’s consensus and at the top end of the consensus range.

Improvement includes a 3 point gain to 64 for 6-month sales and a 2 point gain to 63 for current sales. The traffic component also is also improving but not very much, up 1 point to a still weak 44.”

This supports our view that recession risk remains low at this juncture…