Causality Crisis
1 Year Projection For Homebuilders
Bank of America's Correlation Crisis captivated my attention, perhaps it's the crisis in the title. Whatever the reason, the question ``We see increasing risk signals that remind us of the run- up to the 2005 correlation meltdown,'' the analysts wrote in the report titled ``The Correlation Crisis of 2007?'' initiated a quest for objective numbers, unfortunately, nothing substantial was found in the article.
For curiosity sake, I executed an analysis for several homebuilding companies (PHM,TOL,CTX,LEN), as I did several days ago, not simply seeking correlations but a correlation of causations. What happened next surprised me, I had to re-run several times to confirm -- the performance projections have degraded further, those drops in similar chart patterns weren't splits.
What I did discover through undocumented chart patterns is an average of 50% probability of ascension for homebuilder stocks (PHM,TOL,CTX,LEN) within 1 year by finding similar charts for this year through image recognition, which is very weak. Click on hyper-linked symbol for analysis.
To put the analytics in context, as it turns out 1996 was a magic year -- it's price pattern proved to be similar to 2007 from several discrete analysis (PHM,TOL,CTX,LEN). What happened in 1996? It was where housing bottomed-out or as some would say, home price appreciation began and Wallstreet was adversely affected when several japanese housing-load companies revealed 75% of their portfolios consisted of bad loans that totaled at least 77 billion dollars.
The 1996 minutes from the Federal Reserve summed it up "In this view, a level of housing construction somewhat below the peak reached earlier in 1996 was likely to be sustained, buoyed in part by the recent decline in mortgage interest rates and the continuing rise in consumer incomes and favorable consumer sentiment."
As the numbers currently project, it seems a healthy rebound is not going to occur within a year if things remain as they are, if anything, according to the charts, there will be a re-test.