Housing dominated this week's news. On Tuesday, the Census reported that housing permits were down .4% M/M and 2.3% Y/Y.  The same report showed housing starts decreased 5.8% M/M and rose .9% Y/Y. But the longer trend for both shows a relatively stable state since early 2015.

On Thursday, the NAR reported that existing home sales declined .9% M/M but were up .8% M/M. Like the permits and starts charts, existing home sales have moved sideways for the last year, save for two drops that were immediately followed by large gains:

Economic Conclusion 

There was insufficient information this week to draw a conclusion about the macro economy. However, housing, which has been an important component to the recovery, continues pointing toward modest growth. While the sector has trended sideways since early 2015, it hasn’t significantly fallen, indicating the sector should maintain its current level of activity for at least the next few months.

Market Overview 

This week, the big news was the Fed’s dovishness, which sent the market higher on Wednesday afternoon. However, prices drifted lower for the rest of the week. A look at the daily chart shows we’re back to some type of consolidation or sideways movement.

Two weeks ago, prices sold off a bit, falling to near the 38.2% Fibonacci level. They have since rallied, but remain below previous highs.

Going forward, the market faces strong fundamental resistance. The SPYs and QQQs current and forward PEs (24.81/24.75 and 18.43/20.15, respectively) are expensive. And the 3Q earnings season isn’t looking positive:

Estimates for Q3 have come down, following a well-established historical trend. Total Q3 earnings for the S&P 500 index are currently expected to be down -3.1% from the same period last year on +1% higher revenues. The chart below shows estimates for Q3 have evolved since the start of the quarter.

We’re back to where we’ve been for the last 18-24 months; an expensive market that needs strong earnings growth to move higher is facing an earnings decline.