Is The Housing Market Warning Us Stocks Have Topped?
#stockmarketcrash #housingmarket #crash #stocks #stockmarket #dji #djia #spx #spy
Trading Fam,
In 2006, the housing market here in the U.S. crossed what I call “The Weakening Demand Zone” and entered into dangerous territory. This was critical data and a red flag that was warning us that something was not right. As the housing market grew weaker, it took the Fed two months to notice before it began to pause rates. It took 14 months before the Fed began to ease rates through quantitative easing. But it took the retail market 17 whole months before they stopped buying stocks and began selling!
Fast forward to recent times. The housing market began to warn us via negative bearish divergence on the monthly RSI that the housing market was not all that it appeared. This was its first red flag.
Then the housing market began to cross below my critical threshold, “The Weakening Demand Zone,” once again in September of 2022. This was the housing market raising its second red flag and signaling a warning.
Five months later, the Fed paused rates. Our third red flag.
Two years later, the Fed began to lower interest rates. Our fourth red flag.
All the while, retail continued to pile into stocks, creating new highs on all indexes. But it took the Fed 2.5 times longer to begin pausing rates after we dropped below my Weakening Demand Zone! If we multiply the time it took for the DJIA to top from the start of our housing market crash in 2006 (17 months) x 2.5, we end up with 42.5 months! 42.5 months from September of 2022 (where we crossed below my threshold) is mid-March of this year, NOW!
Is the housing market telling us our top is in? My bet is, yes. What is yours?
✌️Stew
Link to chart:
