Bears in U.S. equities are quickly becoming extinct. Day after day, week after week, the DJIA and S&P 500 grind higher emptying the trading accounts of sellers. It appears that it will take a fundamental shift in the market dynamic for the U.S. equities indices to enter corrective territory.

Can Anything Stop The Rally?!

It doesn’t seem to matter what the economic data says these days, investors are just flat out bullish towards the U.S. indices. Today’s housing data is a great example of what I am referring to.

U.S. Real Estate Continues Its Decline. It Just Doesn’t Seem To Phase The Bulls!

Earlier today, we had several construction reports to look over. Well, the markets have had time to chew on them, and have discounted their meaning completely.

Event                                         Previous       Projected      Actual

MBA Mortgage Applications          -2.1%            NA                 3.6%

Building Permits   (Sept.)             1.272M          1.250M          1.215M

Housing Starts (MoM, Sept.)        1.183M          1.175M          1.127M

The real estate market is a big part of the U.S. economy. As these stats show, mortgage applications are up while actual construction is way down. This means that people want to buy houses, yet there is shrinking supply coming online.

Developers want to build. That is how they make money. Decreases of over 4.5% in both Building Permits and Housing Starts month-over-month is a serious lull, even with the looming North American winter.

These numbers signal changing winds in the lending environment. In a similar fashion to August and September, commercial lenders are becoming tentative about a potential December rate hike.

A tight lending environment will guarantee an economic contraction, and possibly an end to our current bull market in equities. Eventually, official monetary policy towards the USD will bring this about.

Unfortunately for us, the Federal Reserve keeps decisions like these close to the vest.