ONE-TWENTY TWO: Trading Financial Markets
Exploring the poetry in financial markets for students of money and economy since the year 2000.
Question. When an analyst lowers the price target on a stock to a level still substantially higher than the current price, what do you expect to happen? What if that price target comes with a downgrade from buy to neutral? If you answered lower, you win a prize… a discounted price on homebuilder stocks. A … Read more
The Follow-Through: Churning While the S&P 500 (SPY) cruised higher all week, much of the rest of the market resigned to churning. The dichotomy of a market rebound versus the wounds left to heal continued to play out. Many of the follow-through trades for this week churned with the rest of the stock market. See … Read more
Stock Market Statistics AT40 = 75.0% of stocks are trading above their respective 40-day moving averages (DMAs) (first oversold day)AT200 = 18.4% of stocks are trading above their respective 200DMAsVIX = 29.3Short-term Trading Call: neutral Stock Market Commentary Buyers followed through on the building momentum from the previous two trading days which drew a line … Read more
Housing Market Intro and Summary Something surprising is happening in the middle of the current downturn in the housing market: buyers keep coming and home builders are staying resilient and resolute. A series of earnings reports from publicly traded home builders do not reflect the historic plunge in builder sentiment from April (see below). The … Read more
Overall Assessment I am bullish on Lennar (LEN). The company’s Q3 2019 earnings report featured the effects of an on-going pivot to serve the entry-level market and to deliver lower-priced homes. Average selling prices came down, but deliveries, orders, revenues, and margins all improved. A “land light” strategy is helping Lennar increase its cash coffers … Read more
The grind played out for about 5 months – including a sell-off in June ahead of earnings. Now, KB Home (KBH) finally managed to break out to a new high for the year. KB Home (KBH) finally joined the growing list of home builders breaking to prices last seen last year and earlier. KBH is … Read more
My wait for an entry point to buy Lennar (LEN) continues. On a day with multiple warning signs about the U.S. economy from companies like Csx Corp (CSX), the Census Bureau piled on with lukewarm data on housing starts. While single-family housing starts for June increased month-over-month by 3.5% to 847,000, housing starts decreased on … Read more
The Good When Lennar (LEN) reported earnings on June 25th, the stock market responded with the kind of hesitation and whiplash symbolic of the seasonal topping pattern in place for home builders. The first reaction was celebratory as LEN gapped upward and rallied as high 3.6%. The initial reporting on LEN earnings focused on all … Read more
(Updated on January 3, 2023 in “How Home Builder Stocks Trade In A Seasonal Pattern“) The Spring selling season is a critical period for the housing market and usually delivers peak activity for the year. This seasonal pattern forms a notable pivot for the stocks of home builders. These stocks typically rally on the wings … Read more
On March 25th, CNBC’s Fast Money discussed very active options trading in the iShares Dow Jones US Home Construction Index (ITB). Call option volume was triple put option volume. Of note, some trader purchased 5000 April 12 $35 weekly calls with ITB trading at $34.60 and just under its 200-day moving average (DMA). That trader … Read more