Signs Point to a Trend Reversal in September

NEW YORK (TheStreet.com) -- Since March 9, the S&P 500 has jumped 52% and has left the equity benchmark index valued at nearly 19 times the profits of its companies. Historically, the month of September is no friend to the equity markets and many believe that history will not be broken.

On the positive side, there have been a few economic indicators suggesting that the economy is recovering, which traditionally gives a boost to the markets. The Institute of Supply Chain Management reported that its index for measuring manufacturing activity rose to a 52.9 in August, indicating that expansion took place last month.

In addition, the real estate sector is showing signs that it may have hit a bottom. The National Association of Realtors stated that its seasonally adjusted index of sales contracts for previously occupied homes signed in July rose 3.2% to its highest level in the past two years. To add icing to the cake, construction of new homes and apartments rose 2.3% in July.

Although this is encouraging news, there are more signs suggesting that the markets will cool-off. In the real estate sector, many suggest that the recent boom has been fueled by the government's $8,000 first home-buyer tax credit and historically low mortgage rates and can't be sustained when the tax credits expire and interest rates start creeping up.

Many also believe that there will be a point of saturation where buyers who qualify for mortgages will eventually run out. After all, one needs a stable job history and the ability to prove sources of income to obtain a mortgage loan; until unemployment levels stabilize and start improving this will remain a challenge for the sector.