• Thanks for reading my Diary today.

Though portions of the market were awful today (industrial cyclicals), overall, it bent but didn't break -- a win for the bulls.

 Enjoy your evening!

• Doing some after-hours trading.

I am shorting more shares of PowerShares QQQ (QQQ) at $68 in after-hours trading.

• Better luck next time.

My gnome appears to have slipped up as there is $1.2 billion to buy (in stocks) at the close now.

• Out of the stocks and into the bonds?

My gnome is hearing about a large rebalancing out of stocks and into bonds at the close today.

Personally, I have no clue on this one from my gnome.

• While I anticipate a near-term slowdown, I still expect that we'll muddle through a domestic recovery over the next few quarters. 

All week, I have been writing that the tape reads economic slowdown -- more of this today, especially with the schmeissing of cyclicals, 2.20% 10-year U.S. note yield and the breakdown in iShares FTSE/Xinhua China 25 Index Fund (FXI) .

That said, my baseline expectation remains a muddle-through domestic recovery with real GDP growth in the 1.5%-to-2.25% range for the next few quarters.

• I covered my Goldman short but added to my American Express short.

I have covered my Goldman Sachs (GS) short, and I have added to my American Express (AXP) short.

• I covered half my short position at $139.80.

I have covered half of my SPDR S&P 500 ETF Trust (SPY) at $139.80.

• The shares seem to be heading toward a technical breakout.

I also purchased more International Flavors & Fragrances (IFF) today, as the shares look like they are about to break out technically.

• It could become an economic tailwind if it continues its descent.

Crude oil is now breaking below its recent range.

Down by nearly $2.50 a barrel, it could become an economic tailwind if it continues its descent.

This observation also applies to many other commodities that are breaking down today.

I have bought Yahoo!, Walter Energy, TBT and CSX today.

Today, I have added to or initiated the following longs: Yahoo! (YHOO), Walter Energy (WLT), ProShares UltraShort 20+ Year Treasury (TBT) and CSX Corporation (CSX).

• This is according to a Bloomberg report.

Bloombergreports that secondary market share trading in Facebook will be halted in early April as the company prepares for its initial public offering.

• In fact, the Department of Commerce did adjust for leap year in its durable goods report.

Please disregard my previous post on the failure of the Department of Commerce to adjust for the leap year in this morning's durable goods report.

A representative just called back to say that the Commerce Department made a mistake in what it told me earlier.

In fact, the Department of Commerce actually did adjust for the extra day of the month.

This doesn't exactly build up confidence in its reports, however, since the bureacracy said earlier in the day that it had not adjusted.

• Let's hope the shares find a catalyst.

High above the Alps, my gnome is saying another large filer (of greater than 5% of the shares) of Yahoo! (YHOO) will soon appear.

This one I believe.

There is value in Yahoo! under $15.25, and I have just nibbled. What the shares need is a catalyst.

Stay tuned.

• I am picking up more common shares in both names and some out-of-the-money calls in Walter Energy.

I am adding further to Walter Energy (WLT) and CSX Corporation (CSX) further now.

And I'm buying some Walter out-of-the-money calls just in case.

• The EU is set to boost the aid ceiling to 940 billion euros this year.

The market has stablilized on word that the EU is set to boost the aid ceiling to 940 billion euros this year.

This has been expected.

The 940 billion euros include 500 billion euros from the permanent ESM and 440 billion euros left over from the EFSF.

The key is how much the IMF provides on top of this. (They were simply waiting for the EU to release the size of their money provided to firewall the debt problems.)

• I increased my TBT long by nearly 10%.

I raised my ProShares UltraShort 20+ Year Treasury (TBT) long by about 10% in today's weakness.

• I am buying more shares at $21.47.

I am adding to CSX Corporation (CSX) at $21.47 now.

• I picked up some shares at $57.75.

I just picked back at Walter Energy (WLT) at $57.75.

• A breakdown couldd lead to selling and markdowns over the next few days.

Market bulls are set up for markups at quarter-end (Friday), but a breakdown could spell selling and markdowns over the next few days.

• I am basing this assumption on the many domestic, European and Chinese economic releases of the past few days.

Based on the many domestic, European and Chinese economic releases of the past few days, I would suggest that the ISM (to be reported on Monday) will be weaker than expectations.

• The durable goods report is even less than meets the eye.

I wanted to follow up on the durable goods report that was issued earlier this morning.

According to the Department of Commerce, the government did not adjust the durable goods report for an extra calendar day in February 2012.

So, it appears that the report was even worse than originally feared.

• The S&P 500, NYSE, Nasdaq and Russell 2000 all have bad breadth.

• S&P 500: 156 advancers vs. 336 decliners
• NYSE: 613 advancers vs. 1,176 decliners
• Nasdaq Composite: 972 advancers vs. 1,038 decliners
• Russell 2000: 862 advancers vs. 963 decliners

• The leadership grows ever more narrow.

Heads up, heads up

Here's another one

And a, and another one.

-- Ludacris, "Get Back"

I continue to believe that my ludicrous forecast of a sharp reversal lower in the Nasdaq is possible today.

The Nasdaq breadth continues to erode as the leadership grows ever more narrow.

• Foxconn's Shenzen workers complain about forced time off due to slow iPad sales, says a report.

I am not sure how consequential this is, but I am passing it on. 

• We moved too fast.

Again, the tape says slowdown, as cyclicals get schmeissed again.

• The Nasdaq could reverse to the downside.

Gun to my head, the Nasdaq could show a sharp reversal to the downside sometime today -- it is up nicely now -- as the exchange narrows further in the NBA (nothing but Apple (AAPL)) market.

The ranks of the leaders are growing less numerous as breadth deteriorates.

The leadership of Priceline (PCLN), Apple, Google (GOOG), Baidu (BIDU) is getting more and more conspicuous and worrisome.

• The FXI is now trading below its three moving averages.

Yesterday I said that the failure of the iShares FTSE/Xinhua China 25 Index Fund (FXI) to hold gains was worrisome and perhaps indicative of a harder landing than most envision.

Overnight the Chinese markets got schmeissed further (-2.6%) and the FXI is now trading below its three moving averages.

• It tolls for the housing market.

No man is an island, entire of itself; every man is a piece of the continent, a part of the main. If a clod be washed away by the sea, Europe is the less, as well as if a promontory were, as well as if a manor of thy friend's or of thine own were: any man's death diminishes me, because I am involved in mankind, and therefore never send to know for whom the bells tolls; it tolls for thee.

-- John Donne, "Meditation XVII"

The housing market's shadow inventory of unsold homes is starting to clear, certain areas of the country are experiencing signs of more robust activity, and, despite low levels of new-home production (based on historical data), homebuilders are even regaining pricing power in several geographic regions.

Stated simply, the U.S. residential real estate market is about to launch a broad and sustainable multiyear recovery. And, from my perch, the share price strength in housing-related equities is telling the real story of an improving and self-sustaining home market that could continue through the balance of this decade.

As proof of my emerging optimism, I would suggest listening to Toll Brothers' (TOL) last two earnings conference call presentations and the recentobservations made by CEO Doug Yearley in the media.

• Spring selling season is strong. Over the past five years, Toll's early-spring selling season had sputtered out in late February/early March. In 2012, however, its sales activity is getting stronger as the year progresses.
• Homebuilder pricing power is returning. In fact, Toll Brothers is having its best selling season since 2007. Orders are up "significantly" and nearly 30% of the company's communities have increased home prices. (A year ago, none had pricing power.)
• The sun shines in Florida. Miami, Florida, one of the epicenters of home speculation in the last cycle, which had been previously inundated with foreclosures two to three years ago, has turned around meaningfully, thanks to an inflow of South American and Northeast U.S. buyers. This turnaround has been in place for nine to 12 months.
• Shadow inventory is clearing. Surprisingly, even some areas of the country that have been adversely impacted by the weight of a large shadow inventory of foreclosed or soon-to-be-foreclosed homes, have improved measurably and are turning the corner. A good example is Phoenix, Arizona, which had over 15 months of supply for sale 12 months ago but now has a developing shortage of inventory (under three months of supply).
• West Coast land prices are soaring. In certain areas of northern and southern California, the raw land market is regaining a speculative tone as prices have risen dramatically. The strength of land prices, while well ahead of the health of the home price market, is typically a leading indicator of industry pricing and activity.

To refresh everyone's memory, one month ago, I made the case that the foundation of the housing market was firming and the runway for a recovery is lengthy.

It is my expectation that both new- and existing-home prices, which suffered price declines of close to 34% from 2007 to 2011, face a better year ahead in 2012 and over the balance of the decade.

While the housing recovery of 2012 to 2020 will likely start out slowly, owing to the large inventory of unsold homes, still-restricted mortgage credit and the current preference for renting, there is now ample evidence that residential real estate markets have already turned in a national market that has grown bifurcated. Areas of the country that are unencumbered by a large supply of foreclosed properties -- for instance, the Washington, D.C.-to-Boston corridor -- are doing better. Cancelation rates are down dramatically, and some pricing power is returning for the homebuilders. By contrast, areas such as inland California, Nevada and the like continue to suffer in price and in sluggish transaction activity as a result of the indigestion of the last cycle.

In other words, the weaker regions are masking a developing national recovery in housing that has the potential to be more durable and healthier than the past cycle. (The Case-Shiller index results this week belie the improvement because it is an index of all home prices, not a regional study.)

With a hat tip to Jim Paulsen at Wells Capital Management for providing some charts as evidence, here are the seven main reasons why (in conjunction with the Toll Brothers comments) I expect a durable recovery (in demand, activity/transactions and in prices) in the U.S. housing market:

1. Housing affordability is at a multi-decade high.

2. Reflecting normal U.S. demographic trends (household formations of 1 million-plus per year) and a low level of 2008-2012 new-home production, there is plenty of pent-up demand ready to be unleashed.

3. As rental prices have risen and as home prices have fallen, the economics of home ownership has improved.

4. We have seen a decisive improvement in the jobs market.

5. Mortgage rates are at historic lows.

6. Housing surveys have turned positive.

7. Confidence is improving.

• Februrary durables rose by 2.2%, which was below consensus.

Break in: Februrary durables rose by 2.2% (ex-transports, climbed by +1.6%), which was below consensus.

As I wrote yesterday, domestic manufacturing activity is slowing down.

• Goldman removes its Overweight rating on commodities.

Goldman Sachs takes down its Overweight in commodities based on a softening macroeconomic environment that the firm forecast in second quarter 2012.

As I wrote yesterday, I, too, see a slowdown in manufacturing activity.

• The gradual recovery in housing will have a meaningful multiplier impact on the domestic economy.

My upcoming opener paints an optimistic outlook for the U.S. housing market.

As an old housing analysts (Kidder, Peabody & Co.), I have long thought that housing is the straw that stirs the economy.

And, though I expect the turn to be gradual, the housing cocktail is about to get might tasty, because the elements of a self-sustaining recovery in the residential housing market that could continue throughout the balance of this decade are now in place.

It is one of the important reasons why I am so bearish on U.S. bonds, because housing has a meaningful multiplier impact on the domestic economy.