What May Be In Store For The Homebuilders This Week
Market Trend: Down
Market Outlook: Neutral to
Bearish
Macroplay: Let’s Play Housing
The Broad Market Outlook: The Hard Part Is Coming
Looking back through the lens of history, it is likely that the easiest thing
about the Iraqi war will have been the military campaign. The much harder part
will be waging the ensuing political and economic peace.
On the
political front, the new Axis of Evil — Russia, France, and Germany — are
threatening to prevent Iraq from selling its oil to fund its reconstruction,
unless the Bush Administration surrenders their authority to the UN. Chances
of this are less than zero, and the ripple effect on the economic front could
mean higher oil prices than we would otherwise experience, more fissures and
cracks around global cooperation and coordination, and a greater burden on US
taxpayers to fund the reconstruction.
The Week’s Macro Data Market Movers:
Bringing Down The House
The
Macroeconomic Calendar
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Corporate earnings news will dominate the market. It is difficult to imagine a
lot of positive surprises EXCEPT in those companies which may be gaining market
share at the expense of their rivals — even as the economy remains sluggish. So
the earnings calendar should be a significant weight.
On the
macro data front: With the NAHB Housing market Index coming on Tuesday and the
MBA mortgage survey and housing starts coming on Wednesday, this is likely to be
a big week for homebuilding stocks. Against the backdrop of growing warnings of
a housing bubble and spent up demand, housing stocks over the last month have
been on an absolute tear, with several looking to bust out over 52-week high.
If the
data goes as we think it well might, that bust-out could well turn into a bust.
In the face of a negative surprise, particularly on building permits, the
housing stocks probably won’t retreat as fast as the Republican guard, but if we
had to bet on this sector for the week, we’d have trouble going long bravely.
One
caution shorting the housing sector: If the economy is as bad as we think it is,
and the Fed begins to buy longer-term bonds to drive the long end of the
yield curve, housing could get one last leg up the charts.
Macroplay of the Week:
Bringing Down the House
See
the macro data mover rap above on the housing sector (including our cautionary
note) and be ready to short what actually appear to be fairly technically strong
housing stocks. The kicker here is that this sector will die on fundamentals.Â
If you
have a favorite macroplay or stock you would like us to consider in this column,
send an e-mail to
peter@peternavarro.com or go directly to
https://www.peternavarro.com. We’d love to hear from you.  Â
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