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The bullish engulfing pattern that promised to provide the next technical bounce for the homebuidler stocks failed on Friday. Just like that, the bears are poised to regain control and take the housing-related stocks even lower. There is good reason to brace ourselves for another month of downside troubles:
When the sub-prime mess first surfaced for the majority of us back in February, the market quickly dismissed the perils because it seemed like it was just the "dumb" money that was getting hurt: mortgage companies and brokers too greedy for their own good, get-rich-quick housing speculators, and poor people with no other hope of securing a home. But now, we have the "smart" money stumbling over themselves. When big boys like Bear Stearns (BSC) fumble, the rest of the financial world hesistates and listens carefully. The market has not yet cared to take us for a ride like we had in February and March, but June has definitely stalled out the market's rapid recovery from the year's lows. The market's bounce was maintaining a pulse in the housing-related stocks. But I now think if the housing-related stocks continue to sink, we will have a clear indicator of the downward direction the rest of the stock market wants to take. Be careful out there! |