Tags: Three | Signs | Hope | Year

Three Signs of Hope for the New Year

By    |   Tuesday, 17 January 2012 12:25 PM

Last year was a rough one for the financial markets, no doubt. Also, 2010, 2009, 2008 and some of 2007 were the same.

However, there is some hope for 2012.

In fact, there are three things that I’m looking at that are surprisingly turning higher in 2012 so far.

The first surprise that I’ve found is in the housing market, believe it or not.

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I got to looking at the S&P Homebuilders Index (XHB). You’d think it would still be near a 52-week low. Instead, it’s near a 52-week high. In fact, some homebuilders from D.R. Horton (DHI) to Toll Brothers (TOL) have already hit new 52-week highs for the year.

That typically doesn’t happen like that unless there’s a turnaround coming in housing that hasn’t manifested on the newswires just yet.

But something is stirring in the homebuilders or else we would not be seeing new 52-week highs happening in this sector that has been avoided like the plague for years now.

The next “shocker” is found in the banking sector. When I started looking at the Bank Index ($BKX) lately, I saw that it had broken its downtrend line. Also, Wells Fargo (WFC), JPMorgan Chase (JPM) and others have done the same.

This is another sector that investors have avoided for the last several years and rightfully so. But now, fresh buying pressure is coming into these stocks that have traded under their book values not long ago. Maybe the price of banks stocks finally got to a Doomsday scenario and then when that didn’t happen, they were underpriced.

If housing and banks rebound this year, then that holds some promise for the major stock averages for 2012.

I know the news is still bad. I listen to it and don’t disagree. However, the stock market is a discounting mechanism. It looks ahead 6-plus months to see what things may be like. And right now, the savviest of investors appear to be saying that things could be improving for the first time in a long time.

But then there’s a third area that is shockingly turning around too. It’s found in the commodity area: copper

Copper is a great indicator to watch to tell how things are doing in the global economy. Why? Copper is in most everything we produce: offices, residential housing, cars, electronics, appliances, etc.

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If the global economy is growing, it needs more of these things … and if the global economy is shrinking, it doesn’t need more of those products.

So when the global economy is expanding, the wholesalers that make these products buy up more copper to make those products and when demand is waning for their products they back off of copper purchases.

Well, ever since last October, Copper has been coiling up into a triangle chart pattern on its daily chart. There was a big tug-of-war going on about which way the price of copper was about to go.

However on Thursday and Friday of last week, copper broke out of that triangular pattern to the upside which showed that the buyers won the tug-of-war. Why did they win? It must be that they feel that the global economy is turning around or else they wouldn’t be inclined to buy copper which goes down in value if the global economy shrinks and goes into a recession.

So between housing stocks being at or near a fresh 52-week high and banks stocks breaking downtrend lines for the first time in years and for copper breaking its triangle pattern to the upside, it gives hope that the global economy just may be turning around to the upside.

If this continues, it’s going to be a good year for commodities and the “risk on” currencies like the Aussie dollar, Canadian dollar and New Zealand dollar.

So keep your eyes on these sectors of the economy to see how they perform. If they continue to perform like they have recently … then things could surprisingly end up turning upward even though the news headlines (which tell about lagging data) are still gloomy.

About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Money Matrix Insider. Discover more by Clicking Here Now.

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Tuesday, 17 January 2012 12:25 PM
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