Hussman's Weekly Commentary

John Hussman raises his target for the Dow to 15,000.

Just kidding.

As usual, John Hussman's commentary is a worthwhile read.

With recession signals increasing (though not yet enough to predict a recession with a high probability), it's useful to remember that stocks generally turn lower before the economy, with a lead-time of about 6 months. That may very well be the window we've entered here.

On the economy, the most recent data on housing starts continues to confirm a downturn in housing, which was also evident in the 4.10% drop in new home sales last month. That gives us a new point on our housing starts oscillator, which is already at a level consistent with potential recession.

One of the things I like about John Hussman is his knack for maintaining objectivity. He's been cautious for quite some time, yet he tends to express it in unemotional terms. For instance, he doesn't suggest everybody sell and head for the hills- but he minces no words either:

The major indices remain extended in an overbought condition, which in unfavorable Market Climates tends to give the markets a downside bias. Still, it's important to remember that even unfavorable Market Climates allow for short-term advances – it's just that the average return/risk profile in such Climates tends to be unfavorable.