I doubt that there are many of us who are not guilty of “cooking,” consciously or otherwise, the data collected in a university lab experiment to get the “right” answer. The National Association of Realtors did the same thing with the existing home sales report today. They didn’t like the number, so they changed the seasonal adjustment factor to make it seem better. Using the old SA factor, sales were 6.02 million SAAR, as compared to the reported 6.18 million SAAR. SA sales are now at mid-2003 levels.

Sales were down 16.3% from September 2005. This is a record annual sales decline. Note that sales are reported as of the close of escrow, so the September numbers really cover deals signed in July and August.

Median Prices dropped 2.2% from September 2005. Bloomberg: “… the biggest year- over-year decline since record-keeping began in 1969.”

Tomorrow is yet another Fed day. For the bulls, there is no downside: “The market works in every scenario — if rates go down, the market says ’soft landing’, and if rates go up, the market says ‘economy is strong, so profits and earnings are great.” - Barry Hyman

The truth is, well alright the bearish view is: if rates go up, inflation is the problem and the Fed will have to raise more and more to subdue it. If rates go down, recession is the problem and there is no soft landing in sight.

While the Fed is the market’s focus, the most interesting event this week will be the preliminary Q3 GDP report on Friday. To what extent will it show slowing growth?

One of the oldest sales ploys is to give a false impression of demand for whatever is being sold. Reportedly (on a blog comment): “I saw an interesting thing at an open house in the neighborhood yesterday. The realtor showed up with an open house sign and 7 other people. They stayed the whole 2 hours during the open house, milled around with brochures in their hands, and then left with the realtor at the end. They were hired to make the open house look busy!”

Kate Welling interviews David Levy. “What’s missing is recognition that the “housing bubble” is not just about home prices, home building, and home-equity-financed consumption; it is also about extraordinary financial conditions that enabled a household sector that was unable to adequately service its debt to obtain massive amounts of new credit that have, for a time, masked its financial vulnerability.”

For the last 11 days (as of yesterday), MBH Commodity Advisors’ Daily Sentiment Indicator (DSI) has recorded a 90% or higher bullish reading for the S&P500 futures. This is the highest 10 day average ever recorded in the 19 year history of this indicator. Traders are now more bullish on the market than they were at tops in late 1987 or early 2000, which led to declines of 35% and 50%, respectively. The NASDAQ’s sentiment is similarly extreme. For the last 10 days, an average of 92% of traders surveyed believe the NASDAQ will go higher.

The ECRI index of leading indicators was slightly higher this morning, but remains in a downtrend.