So, what's the probability of a recession? The leading indicators have long since declined enough to signal the potential for a recession, but the broad-based economy to date is fighting off a recession. Furthermore, transportation stocks -- not including airlines -- remain in an uptrend.

As for a housing slump causing a recession, you need to look objectively at housing data before drawing this conclusion. You see, both new housing starts and new home sales peaked in mid-2005 and have moved down consistently since then. So, if you only looked at this, you may improperly conclude that we are only halfway though the real estate recession.

A better indication, though, of where we are in the real estate cycle can be determined by comparing the level of housing starts with the number of U.S. households. The minimum growth rate for housing starts over long periods of time is equal to U.S. household growth. If housing starts do not keep pace with U.S. household growth, there will be a housing shortage. U.S. household growth averages about 1.4% annually, and is the natural floor when supply and demand are balanced. Right now, the current ratio is 1.15%, which is lower than the 1.4% needed to meet growing demand. Sure, the ratio can fall further, but an extended stay below 1.4% is not likely. So rather than being halfway though the real estate recession, we are likely nearing a bottom.

In addition, foreign economic growth is solid, with a plentitude of big U.S. exporters racking up huge gains in earnings. The editors of BusinessWeek reported that both Japan and South Korea are "supplying steel, heavy equipment and construction services to their fast-growing Asian neighbors. My continued top-favored sector of U.S. companies is dividend-paying exporters.

With a bottom in housing likely approaching and no significant weakness in other sectors of the economy, a recession now seems like a long shot.