Saturday, March 3, 11:15 a.m.

Is the market headed higher, topping out, or just resting?

The divergences in the various indexes and sectors provide support for all three views; bullish, bearish, and neutral views.

Investors seem to have made their choice, according to the high levels of bullish and confident investor sentiment.

Insiders seemed to have made the opposite choice a month ago when previous high levels of insider buying reversed to high levels of insider selling.

Even Wall Street is significantly divergent in its outlook and advice.

Some prominent previous long-time bears like Nouriel Roubini have recently turned bullish. Doug Kass, a long-time bear who turned bullish last fall, is back to bearish, saying sell everything.

While most of the major Wall Street firms remain bullish, some like Goldman Sachs, Merrill Lynch, and UBS are bearish regarding 2012.

Mark Arbeter, chief technical strategist at S&P Capital IQ, issued a commentary to clients yesterday in which he said, “We are still looking for a minor top in the major indexes in the near term as the market is very overbought, with price and internal data, and the majority of sentiment indicators at or near extremes. . . . There is very little chart support beneath the market, so when the drop comes, don’t get your hands in the way. . For instance, we believe there is not very good chart support for the S&P 500 until way down in the 1265 to 1270 region, which would equate to an 8% haircut for the index, a little larger than we are currently looking for, but certainly a possibility.”

Warren Buffett said last week that gold cannot be considered an investment since it doesn’t pay a dividend, doesn’t manufacture or sell anything, just sits there, while costing money to store and insure.

But he says he considers buying single family houses to now be the best investment available.

I’m not talking about the timing of either. He may be right on both.

But I’m confused by his definition of why owning one at the right time is an investment and the other is not.

Gold may just sit there, but its value goes up and down just like a stock, and sometimes gets into the same type of powerful secular bull market.

For instance it has gained 600% since 1981.

That’s not an investment? 

But single family houses, and he’s not talking about a home to live in, but buying a bunch of single family homes and renting them out, is an investment. His reasoning is that house prices are at or near a bottom and prices will begin going up at some point, so that five years from now they could be sold at a profit.

And again, I’m not saying that wouldn’t be good timing, but just that I’m confused why he considers houses an investment and gold not if both are bought and sold at the right times.

Houses, like gold, also just sit there. And worse than gold, they require constant maintenance, periodic refurbishing, are subject to deterioration, potential trashing by renters, annual real estate taxes, insurance, interest on mortgages, etc.

And surely he doesn’t expect houses to increase in value by 600% over the next ten years. The long-term trend of home prices in normal times is to increase about 5% annually, spurting up 20% a year or so for a few years in bubbles, but then crashing back to the normal trendline or below. 

It couldn’t be that he’s out on the talk circuit pushing the idea because he’d like to get those 3 million vacant homes occupied, and housing construction going again because fourteen of the companies wholly owned by his Berkshire Hathaway holding company are in the housing industry, including; Jordan’s Furniture, Nebraska Furniture Mart, RC Willy Home Furnishings, Star Furniture, Acme Brick, Benjamin Moore Paints, Clayton Homes, Johns Manville, Precision Steel Warehouse, and Shaw Industries?

To read my weekend newspaper column ‘Is This As Good As it Gets For Now?’ Click here.

Subscribers to Street Smart Report: There is an in-depth U.S. Market Signals and Recommendations report from Wednesday, including gold, in the subscribers’ area of the Street Smart Report website.

They tried mightily in the last half hour to at least close the Dow positive going into the weekend and almost made it.

The Dow was down 65 points at its mid-afternoon low, but buy-programs surged in and it closed down only 2 points, not measurable as a percentage. The S&P 500 closed down 0.3%. The NYSE Composite closed down 0.6%. The Nasdaq closed down 0.4%. The Nasdaq 100 closed down 0.1%. The Russell 2000 closed down 1.6%. The DJ Transportation Avg. closed down 1.0%. The DJ Utilities Avg closed up 0.1%.

Gold closed down $9 an ounce at $1,712.

Oil closed down $2.24 a barrel at $106.60 a barrel.

The U.S. dollar etf UUP closed up 0.7%.

The U.S. Treasury bond etf TLT closed up 0.9%.

European markets closed mixed. The London FTSE closed down 0.3%. The German DAX closed down 0.3%. And France’s CAC closed up 0.1%.

Another less than stellar week, especially in the U.S.

The tables give February a more positive look than the reality since the week ending Feb. 10 slid out of sight, when the U.S. market was in the red for the week, the NYSE down 0.8%, the Russell 2000 and DJ Transports both down 2.1%.

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Next week will be another fairly heavy week for potential market-moving economic reports, including Factory Orders, the ISM non-mfg Index, the ADP Jobs report, and The Big One, the Labor Department’s monthly employment report for February. To see the full list click here, and look at the left side of the page it takes you to.

To read my weekend newspaper column ‘Is This As Good As it Gets For Now?’ Click here.

Subscribers to Street Smart Report: There is an in-depth U.S. Market Signals and Recommendations report from Wednesday, including gold, in the subscribers’ area of the Street Smart Report website.

I’ll be back with the next regular blog post on Tuesday morning at 9:25 a.m.

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