Mr. Euphoria Is MIA

1.) WORRY – I often mention the “Wall of Worry” that healthy markets tend to exhibit. What do we see now? Not much change…consumers are still gloomy! The Conference Board's gauge of confidence decreased 0.8 points to 89.4 after a downward revision to the prior month. Moreover, a measure of expectations for the next six months fell to the lowest level since January. And this is happening even as an indicator of present conditions rose to a four-month high. What does all this mean? The Wall of Worry is still quite intact. Remember, markets do not tend to top on worry…they top on euphoria, and Mr. Euphoria is nowhere in sight.

2.) HOUSING – New single-family home sales fell 10.5% month over month (MoM) in July to a seasonally adjusted annual rate of 607,000. What’s more interesting for the consumer is that the median sales price fell to the lowest level in more than 5 years, to $393,800. Yes, some locations are much, much more expensive. Real estate is always local, isn't it? But this indicates that we may be seeing a repricing in motion.

3.) OIL – Last week, I mentioned that oil (WTI crude) was putting in a lower high near the top of its trend level (shaded area). Since then, when WTI was at about $87/barrel, oil has dropped to about $81/barrel. Where does it go from here? Any one catalyst can change the dynamic of how oil trades. However, volatility indicators suggest that oil needs more time to either consolidate or drop/pull back from here. But with strong support at about $79/barrel, there is more near-term upside in WTI than not. What does this all mean? We might see a counter-trend move up slightly within a longer-term lower trending asset class.