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Housing Stocks Turn Higher

Is it the chicken or the egg?

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You can see that lumber is in a serious inflationary price rise. In the graphs at the bottom you can see the housing index ETF’s are also beginning to show some strength.

Are housing stock prices forecasting an end to the housing crisis because low mortgage rates will increase the demand for new homes which will drive up lumber prices? Are lumber prices increasing because low mortgage rates precede inflation? Lot’s of questions, very few answers at this point.

What you can see though is lumber is going higher which will eventually make its way into the prices of anything made of wood. If its the liquidity that the Fed is pumping into the system, then we will see it in other commodity charts besides housing.

I also thought you might like to see a Retracement view of the oil market in an effort to answer our question:

West Texas Intermediate Crude

I’ve drawn in the lines that represent the top of the oil market a couple years ago and the bottom shortly thereafter. We are currently bumping up against the 50% retracement of the move from top to bottom.

Lumber and oil are two critical inputs into the global economy – and both are moving higher. So let’s see what copper is doing:

Copper

It has not only retraced the entire move from the top to the bottom, it is now higher than the 2008 top.

All commodities are on fire from a combination of demand from the growing economies in the developing world and the printing of money by the US, Japan, and the European Union.

So far the CPI and the PPI are not showing any inflationary pressures:

Consumer Price Index

Producer Price Index

It will be critical to watch the PPI as prices will rise first at the producer level before they move into the the consumer level and show up in the CPI. When I start to see something, I’ll shine a light on it for you here on the blog.

Mark