New home sales and the market reaction

New home sales number is really bad, down 3.9% from Jan. 2007. Market took a dive but finished in green!

1. Market expected 995K in Feb. for new home sales, we have 848K.
2. January home sale number was revised down from 937K to 882K. Without the revision, the news will be more catchy like "New Home Sales down 10%".
3. And I checked the existing home sales number and new home numbers, the previous months were all revised lower, so that the number in this month was better. From per cent point of view. Some one is working hard to reduce the impact on general market, acted pretty much like the Fed, painting a rosy picture for market to see, for as long as possible!
4. And the existing home sale number margin of error is plus and minus 10%, so the number we saw on Friday (up 9%) was within the margin of error!
5. Plus, existing home sales include the foreclosure homes, home people just moved in and could not afford it any more. I think new home sales are better indicator than existing home sales.
6. So the housing market and general economy are weak.
7. Remember the GDP revision from 3.5% to 2.2%? Surely someone wanted to make people feel better. Why it's not revised up? In GDP, in home sales number? And these events happened recently in a critical period of time? Because government doesn't want the market crash, it wants to manage a soft landing! Maybe just my guess work. If the final GDP is at 2.2% or revised higher this week, then I'll trust the government number again.
8. But market sure doesn't care, the dip was bought with force, and paint a better technical picture again today, telling people it's time to buy.
9. And indeed, it may just do that.
10. So I'm bearish long term, and think short term, traders and funds may drive the market up and do another short squeeze.
11. The only negative for market from technical analysis is the over bought condition in S&P500 and Nasdaq.

Plan next:

1. I need to reduce the short positions whenever I have chance, even at a loss.
2. I need to right my portfolio so that I have enough cash to play the worst case scenario: the market push ahead with force again.
3. Now my cash is not enough, so I'm lacking the staying power in the market in the long run.
4. I'm still bearish in 2007, think it will be at least 10% lower than it's current level, but the question is, how does it get there?
5. Will it slowly heads lower? Or goes higher first, like 5-10% higher before it start to fall. If the latter is true, then I'm committed too early on the wrong side!
6. I hope the market won't go significantly higher from current level and let me out easily. If it does go higher from here, I have to reduce positions at loss one step at a time.
7. From now on, not only need to read market carefully, but also need to keep a balanced portfolio so I have staying power in case I'm betting on the wrong side. This is not the first time I'm too early in predicting a market turn!