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Five Years from the Bottom: Keep an Eye on Housing and Banks

Stocks in this article: BAC C JPM WFC

NEW YORK (TheStreet) -- The first cracks in the housing bubble began with the peak in housing-related stocks in mid-2005. The home price bubble popped in mid-2006. Early signs of the Great Recession began when community bank stocks peaked in December 2006. The larger regional banks peaked in February 2007.

My market call was that you cannot sustain a bull market for stocks with a bear market in bank stocks.

The major averages succumbed into bear markets with a market top for the Russell 2000 in July 2007, followed the Dow Industrials and S&P 500 in Oct. 2007, the Nasdaq in Nov. 2007 and finally Dow Transports in May 2008. The bear market was underway and the Great Recession began at the end of 2007.

All eight of the indices in today's 'Crunching the Numbers' table set bottoms five years ago today with the S&P 500 fractionally above the devilish '666' on March 9, 2009.

In May 2005 I wrote an article on RealMoney warning that homebuilder stocks were vulnerable. This can be tracked looking at the weekly chart of the PHLX Housing Sector Index (209.22) below.

Courtesy of MetaStock Xenith

Looking at Monday's table and the above graph, the housing index peaked at 293.66 in July 2005 and the decline to its March 9, 2009 low was 81.5%. Failure to hold its 200-week simple moving average in June 2007 accelerated the downside.

Since March 9, 2009, this index did not have significant upside until it broke out above its 200-week in January 2012, and in September 2012 moved above its 38.2% Fibonacci Retracement at 145.55. The next upside targets became the 50% retracement at 173.80 then the 61.8% retracement at $202.05.

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