The strength in housing stocks (see below) in face of a host of negative industry data bodes well for both housing and the economy.
It suggests severe weather has been a big factor in soft economic reports in recent months.
Obviously, there are doubters or Monday’s surge in the market would have followed through.
Generally, markets that are going to tank, don’t waste time doing so.
There is room for a further correction down close to DJIA 16,025 (S&P 500:1,830), but the prospect for a spring rally looms. If the BIG money and institutional money managers see that, the rally will come sooner.
Just to be safe, investors should get ready for an abrupt change in consumer and investor sentiments when warmer weather breaks out. The BIG money won’t wait for the winter ice to thaw. If it sees a little daylight it will pounce.
The market has been digesting Monday’s surge in prices with a minor “lid” on a rise in prices above DJIA 16,245 (S&P 500: 1,852). Minor support is DJIA: 16,155 (S&P 500: 1,840).
Either of these levels can be broken easily, but odds favor a break to the upside.
Fed chief Janet Yellen testifies before the Senate Banking Committee today starting at 10:00. Yellen is expected to stick to the “measured move” policy on future tapering. The Street is most interested in WHEN the Fed plans to abandon its zero interest rate policy and what would be the trigger to prompt it.
This market reminds me of a batter stepping into the batter’s box, kicking dirt around, planting his cleats, taking a few cuts, staring the pitcher down and getting ready to take his cuts.
Investor’s first read– a daily edge before the open
S&P 500: 1,845
Nasdaq Comp.: 4,292
Russell 2000: 1,181
Thursday, February 27, 2014, 2014 9:13 a.m.
HOUSING STOCKS SURGE
Housing stocks responded positively over the last seven days to bad industry news. Severe winter weather has been blamed for the morbid data, which included the Housing Market Index, MBA Purchase Applications, Housing Starts, Existing Home Sales, and the S&P Case-Shiller Home Price Index.
I began tracking the following housing industry stocks Monday, February 17, in order to gauge the impact bad news had on them.
If they held up well in face of bad news, it stands to reason the severe weather masked underlying strength. If the stocks plunged it would be confirmation the weakness was real.
The stocks not only stood their ground, they extended their rally yesterday when the group got its first piece of good news that January New Home Sales jumped 9.0%. Pending Home Sale will be reported at 10:00 a.m. Friday.
The reaction of this group bodes well for the economy as a whole, since housing is vital for its continued recovery.
Beazer Homes(BZH: Friday, Feb. 14 - $21.26): Wednesday close: $23.49 PulteCorp (PHM: Friday, Feb 14: -$20.02): Wednesday close: $21.25
Toll Brothers (TOL: Friday, Feb. 14 - $37.79): Wednesday close: $38.90
KB Homes(KBH: Friday Feb. - $19.03):Wednesday close: $20.18
DR Horton(DHI: Friday, Feb. 14- $23.62): Wednesday close: $24.85
A BEST SIX MONTHS to own stocks – No more corrections ???
Over the years, the Stock Trader’s Almanac* has expounded on its significant finding that the stock market performs better between November 1 and May 1 than between May 1 and November 1.
The Almanac’s “Best Six” goes back to 1950.. The six months is a snapshot between November and May. Many major market advances often start before November, but the point made here is the period between fall and May is where the action is.
The six months between November 1 and May 1, have consistently outperformed the six months between May 1 and November 1
Is this going to be another “BEST six months to own stocks ? . So far, the DJIA is ahead 5.6% since October 31, 2013 even with a 7% correction in the interim.
Over of the last 25 years, Nov.1 to May 1, have produced 19 up-years, 3 flats and 3 downers. The best years averaged gains of 11.8% with the best year up 25.6% (1998 – 1999).
With the market off to a great start in October , it looked like a BEST six months was a no-brainer. This concerned me, since my research indicated that
prior to the January –February correction, I warned over the last 25 years, there have been 14 corrections ranging between 6% and 16% during this November1 to May1 period. Seven of those started in January, two in December and four in February.
We have had one correction so far since October 31, another correction is possible, but unlikely.
Over the last 25 years, only two corrections occurred during the November 1 to May1 six months. In 2002 there was a 6.2% correction in January and a 6.5% correction in March/April. In 2003, there was a 7.0% correction in Nov. 2002/December 2002 and a 12.9% correction in January/March of 2003.
As January goes, so goes the stock market for the year, according to the January Barometer (JB).* The 3.6% drop in the S&P 500 in January suggests a very challenging year for investors and clearly not as rewarding as 2013 when the S&P 500 rose 29% after a 5.8% rise in the preceding January.
The JB boasts an 89% accuracy rate over the years with most of its misses explained by unpredictable events, such as war and extreme bull/bear turning points.
The rationale for the JB having predictable value is that a new year is accompanied by year-end and new year portfolio adjustments and decisions based on projections for the year ahead. It is also a time when institutions receive a lot of new money that must be put to work.
So far in 2014, the S&P 500 is unchanged. However, since January 31, its up 3.6%. Conclusion: As a barometer, it still suggests a challenging year for both bulls and bears.
The economic calendar is loaded this week with both economic and housing reports.
For detailed analysis of both the U.S. and Foreign economies along with charts, go towww.mam.econoday.com. Also included is an explanation of each indicator. If you want to know when the next Employment report or any other key report will be released that info is also there under “event release date.”
Chicago Fed. Nat’l Activity Ix.(8:30) Plunged in Jan. to a minus 0.39 from a minus 0.03 (revised) in Dec.
PMI Services Flash (8:58) Dropped sharply in Feb. to 52.7 from 56.7. Weather blamed.
Dallas Fed Mfg.(10:30)Unchanged in Jan. but better than projections at 2.5.
FHFA House Price Ix. (9:00): Dec. was up 0.8 pct. vs. 0.1 pct. increase Nov.
S&P Case-Shiller Home Price Ix.(9:00): Increased 0,6 pct. in Dec. vs. 0,9 pct. increase Nov.
Consumer Confidence (10:00): Feb down 1.3 points to 78.1, however Present Situation was up 4.41 points to 81.7
Richmond Fed. Mfg. Ix.(10:00): Feb. slipped to minus 6 from a plus 12
State Street Investor Confidence Ix.(10:00): Confidence among institutional investors rose sharply in Feb. To 123.0 from 114.7 in Jan..
MBA Purchase Apps.(7:00): Index dropped 4.1pct. in the shortened Feb 21 week; Refi’s down 11%.
New Home Sales (10:00): Jan, home sales jumped 9.0 pct. to 468,000 homes at an annual rate vs. a 427,000 rate in Dec..
Durable Goods Orders (9:30) Jan. dropped less than expected (-0.1 pct.) vs a 5.3 pct. drop in Dec..
Jobless Claims (8:30) Droppes 3,000 for the week ended 2/15 to336,000.
Bloomberg Consumer Confidence Ix.(9:45)
Fed chief Yellen speaks (10:00)
Kansas City Fed. Mfg Ix.(11:00)
GDP – second est. Q4 (8:30)
Chicago PMI (9:45)
Consumer Sentiment (9:55)
Pending Home Sales(10:00)
Feb 11 DJIA 15, 801 Market Crossroads – Up ? or Down ?
Feb 12 DJIA 15,994 Bulls in Charge, but……….
Feb 13 DJIA 15,963 Suddenly, Concern for the Economy
Feb 14 DJIA 16,027 Buyers Panicking ?
Feb 18 DJIA 16,154 A Brief Pause or More Upside ?
Feb 19 DJIA 16,130 Can Market Shake Off Ugly Housing Data ?
Feb 20 DJIA 16,040 Winter Slump – Spring Rebound ?
Feb 21 DJIA 16,133 Housing Hanging Tough – a Harbinger ?
Feb 24 DJIA 16,103 Bull Market – the Pressure to Act
Feb 25 DJIA 16,207 Rally Failure – or Start of Another Up Leg ?
Feb 26 DJIA 16,179 Monday’s Market Action – a Signal ?
“Investor’s first read – an edge before the open”
*Stock Trader’s Almanac
The writer of Investor’s first read, George Brooks, is not registered as an investment advisor. Ideas expressed herein are the opinions of the writer, are for informational purposes, and are not to serve as the sole basis for any investment decision. References to specific securities should not be construed as particularized investment advice or as recommendations that you or any investors purchase or sell these securities on their own account. Readers are expected to assume full responsibility for conducting their own research pursuant to investment decisions in keeping with their tolerance for risk. Brooks may buy or sell stocks referred to herein.
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