Day Trading and Home Values - A Summary
It is widely believed that housing drives the national economy. Supporting this theory is the fact that the current economic collapse started with a collapse in home values.
And after the housing collapse, the stock market followed, taking down millions and millions of American's retirement and investment accounts with it.
Many people believe that the housing sector has reached a bottom, and is headed back up. Indeed, there is evidence to support this believe.
Las Vegas recently reported a record month for number of housing units sold. In some markets, prices are starting to creep back up.
Looking at the markets, it seems that investors believe that things are improving. The Dow recently broke through the 10,000 level again, the S&P is up over 200 points in the last four months.
Despite many companies announcing weak earnings for the third quarter, the market is still holding up relatively well, which is likely due to the believe that housing is recovering.
However, this optimism may be unfounded. One leading research firm, Fiserv, believes that the somewhat good news we've been seeing lately on housing is nothing but a "dead cat" bounce.
Fiserv predicts that the overall median home value in the United States will drop by another 11%+ by June of next year, before finally stabilizing, and perhaps a 3%+ increase the following year.
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Driving the downward pressure on home values will be a deepening of the foreclosure crisis, which is no where near over.
In fact, the record home sales recorded earlier this year in Las Vegas was driven by investors picking up foreclosed properties for ridiculously low prices.
So what does this mean to Quite a bit, actually.
Right now, there are two forces at play. People want to be optimistic about the health of the housing market, and the economy in general. This optimism is leading to an incline in the markets.
But at the same time, reality is the housing crisis is far from over, and at the same time, third quarter earnings continue to be poor overall.
So what will win out? The general investor's optimism for the future, or the harsh reality of the present?
Either way, the volatility created by the two opposing forces will create unprecedented day trading profit opportunities.
For a day trader, volatility is king. That is where profits are born.
As the housing crisis continues, look for negative housing data to battle with investor optimism in the short term, with reality winning out long term.
Short opportunities will abound going forward. Are you ready to take advantage of them?
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