What a Week: Bulls Well-Fed

"The housing numbers out today put the specter of a hard landing back into play," says Nolte. "Those concerns were pretty well laid to rest a couple of weeks ago, but now it's clear that we're not done with housing yet."

Despite the gloom, stocks took a mere dip on Friday to hold on to their gains for the week -- a response that Gary Shilling, president of economic consultant firm A. Gary Shilling & Co., views as a sign of denial. He sides with the bond market, which is posting gains on the premise that the economy is losing steam.

"We come down on the bond side because we are very negative on housing and we think the numbers today are right in line with our thinking that this thing is in deep trouble," says Schilling.

He argues that housing peaked in June 2005, followed by a period of denial that should last between 18 and 24 months before sellers begin lowering prices in earnest.

"Somebody at a cocktail party tells you they're not going to give away their house, but what they're really saying is that they're not going to lower the price to discover the market," he says. "Fast-forward a year and a half to two years from the peak and that's when, if history is any guide, we're going to see prices go off a cliff and take the economy with them."