LONDON's "BULL TRAP" RALLY (e.g. the "Dead Cat bounce") - Is it over?
I think it is ...
Let's look at how I anticipated price moves often before they happened, using UK Builder share prices as my guide.
= = = = = = = = I posted many times here (and on HPC) about my expectation for a so-called "Dead Cat bounce" in UK property prices.
If you had read those posts carefully, you would have been able to get on the right side of that price move, and ride it through the end of 2009, and perhaps longer.
1/ March 2009
I began to signal the possibility of a Dead Cat bounce in late March 2009 with a post on HPC. I was answering a question:"Dr Bubb, you have previously considered shares in housebuilders to be an important bellweather for the future direction of HPI. They have risen significantly this past 2/3 months."
DrBubb / Posted 29 March 2009: link
Not yet. A BUY signal hasnt been flashed yet. But it could happen soon. I am particularly watching Barratt, and comparing its price action to the 1 year (252day) MovingAverage :
Barratt Dev'l (BDEV.L) ... update
A move above key resistance near BDEV-120p / the 252d.MA (52 weeks) would be a sign that the "Bull Trap" move may be about to begin.
. . .
What I find very interesting is that Berkeley / BKG shares have recently flashed a "BUY", by exceeding their 252d.MA and that Tony Pidgley, BKG's chairman (who is well-known for his timing prowess) has recently said that UK property is near a cyclical Low.
Fundamentally, I cannot see this as THE LOW, but I think that a nice Bull Trap is about to be set, and for a while Property buyers will think they 'caught the low', only to find themselves trapped in a losing investment when interest rates go back up."
= = = = = = = =
2 A/ April 2009 -
I saw that a major upthrust in Builders shares was starting:A WARNING to would-be homebuyers... A "Dead Cat Bounce" may soon be underway !
DrBubb / Posted 04 April 2009 on HPC : link
A Global "dead cat bounce" in property will soon be underway, I reckon.
I make the argument for this elsewhere , we even recorded a podcast about it yesterday. For many, this bounce may give a last chance to sell, and reduce debt before the second leg down into a Greater Depression hits.
. . .
I really want to save UK people from a probable Bull Trap, which may will fall into, if they buy on this "Dead Cat Bounce". They will then watch with horror as prices start sliding again, when rates begin their inevitable rise, probably 9-18 months from now.
I still expect a UK low no sooner than 2011, and very probably 2012-13, or later.
2 B/ April 2009
On the early April thread announcing the Bull Trap, and you will see this in post #3:
The Bellwethers should help tell us when to get out.
Right now, the Bellwethers are signalling a "surprise bounce".How long might the bounce last? My guess is about 6 - 12 months, maybe 18.
I think it will be very hard to buy, and resell, and get out with a decent profit.
Let's face it, transaction costs in property are not cheap.
= = = = = = = =
3/ June 2009 "wooble"Along the way, I had a brief "wobble",
since I had done some scary reading about 1930 events that had convinced me that we might only see a 6-9 months rally in stocks. If a second leg down in stocks began in summer 2009, I did not want people exposed to an overly bullish property forecast. But I was careful to suggest that a quicker downturn in UK property would have to be signalled first by a drop in the UK Builder share prices. (note: some of my detractors on HPC picked up on this "wobble", and misquoted my comments without the careful language I had used.)
Dr Bubb / Posted 09 June 2009 : link
I think the DC Bounce will be over before the summer is gone, but as for the specific TURN date, I am watching UK homebuilding stocks to give me an early warning for the Turn. So for those who want to get advance notice of the turn, I would say:"BUILDERS - need watching"
/ The others are still holding up, but I note that...
Berkeley Group (BKG) ... update
...has slipped back below its 252d.MA. This shouldnt be happening if the property Low is now in place..
I would expect to see it back up above 900p very soon, but if it slips lower, that would be an early sign that the DC Bounce may be losing its momentum soon
= = = = = = = =
4/ October 2009
Since stocks held up through the summer, I did not see the conditions that I thought would signal a new property downturn until late October:It's nearly over, the Dead Cat Bounce, Property should peak by year end (my forecast)
Posted 28 October 2009 : link : cache
I cannot ignore those price falls in the Builder shares any longer.
I think it is time to flash : the REVERSAL WARNING !
Having called the Dead Cat Bounce was underway on April 4th, I now think it is time to say: I believe we are seeing the end of it.
I believe now that UK property should peak before year end, and within the first quarter of 2010, you will once again see a sliding market.
The following charts of the Builders are my own prima facia evidence of a market that has lost its upwards momentum:
All Together : BDEV + PSN + BKG + TW ... update
. . .
post #2: Posted 28 October 2009
Here are the charts that convinced me to make the Call ... orig. image
The very high volume on the selloff is the main thing convincing me that turn is happening.
The Builder stocks are being ditched with real enthusiasm
= = = = = = = =
5/ October 2010
Looking back at the price action we have seen during 2010:
Whilst UK Builders peaked in late October 2009, and most broke through their 252d/1-year AMs around the same time as Barratt did (April 2010), the major property indices began to roll over in the first half of 2010. Here are the peaks in the main benchmarks that I follow:
+ Halifax SA peaked in Jan. 2010 - at £169,484
+ My H&N index (average of Halifax and Nationwide) peaked in April 2010 at £169,187
+ Rightmove's index peaked at 237,767, and their Greater London at 429,597 in June 2010
It should be clear by now whose prognosis has been worth paying attention to, that downside momentum in the indices is increasing:
+ Hometrack has reported in September the biggest drop in 18 months.
+ Rightmove has reported a 7.1% drop in Greater London over 3 months
+ Nationwide's own report says:
Martin Gahbauer, chief economist at Nationwide, said September had proven to be an uneventful month for house prices.
He said: "The seasonally adjusted price index for a typical UK property was essentially unchanged in September, edging up by a marginal 0.1 per cent from its August level.
"The three month on three month rate of change, a good indicator of the near term price trend, fell from 0.0 per cent in August to -0.9 per cent in September.
"This represents the first negative reading for the three month rate of change since May 2009 and is consistent with the clear loosening of housing market conditions observed over the summer months."
To me, we are moving into a period of continuing slides, where prices may fall and average of 0.5-1.0% per month or more. I call that rate of decline "Crash Cruise Speed."