Homebuilder Stocks Continue To Tank

Despite the “robustly” rigged GDP number, padded by a dubiously large attribution to construction and home improvement spending, the homebuilder stocks continue their huge sell-off, which started last week. I say that the GDP attribution for construction and home improvement spending is “dubious” because the numbers compiled, massaged and reported by the Government do not correlate with the reports being released by construction industry companies and industry associations or with home improvement/furnishings retailers.
Here’s a daily graph of the Dow Jones Home Construction Index:

The homebuilders currently represent what I believe to be on the of the lowest risk/return short-sell plays in the market right now. Every single one I look at is borrowing $100′s of millions to build up what has become “bulging” home and land inventories.
Most of them will not make it through the next downleg of the housing bear market.
I have written my first research report on a homebuilder short-sell idea .  I believe this stock has an easy 60% return from where it trades now. You can access this report here:   My Research Reports.
Because of the large sudden drop in the homebuilder stocks over the last week, I would suggest reading my report and waiting for an oversold bounce before entering the short. However, you can also short near money calls that expire 3 or 4 months out to start a position now. The reason to do this is you get to hold the premium from shorting the call. If the stock keeps dropping, you can cover the call for a profit or hold it to expiration and keep the entire premium. If the stock moves above the call price by expiration, you let the call exercise and establish a short at an average price of the strike price PLUS the premium you collected from shorting the call.
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U.S. Home Price Gains Slow … or Reverse

Standard & Poor’s reported(.pdf) that U.S. home price gains have slowed dramatically in recent months and, on a seasonally adjusted basis, home prices have now declined for the first time in two-and-a-half years as shown below.

As the the non-seasonally adjusted data and the year-over-year data in this report traditionally receive more attention than the adjusted data, few news headlines are indicating (gasp!) U.S. home price declines, but that may soon change.

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Louise Yamada: Market Still Climbing a Wall of Worry – Backed by the Fed’s Continued Easing

Also, Ryan Puplava, Erik Townsend and Rob Bernard

TECHNICIAN07/26/2014
Jim welcomes back Louise Yamada CMT, Managing Director of Louise Yamada Technical Research Advisors. Louise notes that the market has continued to shrug off bad news, which is a characteristic of structural bull markets. She also notes that the market will likely continue to climb its wall of worry as…
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Will Crashing Commodities Crash The Stock Market?

There are some analysts out there who maintain that the precipitous decline in commodity prices this year bodes ill for the stock market. Witness for example the dramatic drop in the price of corn. Above is a chart of the Teucrium Corn Fund (CORN), a proxy for corn futures. As you can see, corn prices are at multi-year lows right now. This is ironic given that the mainstream media assured us earlier this year that higher ag commodity prices were on the way.
[...] The price of wheat on the Chicago Board of Trade (CBOT) doesn’t present a rosy picture, either. Here you can see an equally conspicuous plunge in the wheat price to multi-year lows.
Continue Reading at GoldSeek.com…

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Quanta Services Inc (NYSE: PWR)

Quanta Services, Inc. provides specialty contracting services to the electric power, and oil and gas industries in North America and internationally. The company’s Electric Power Infrastructure Services segment provides network solutions comprising design, installation, upgrade, repair, and maintenance of electric power transmission and distribution infrastructure, and substation facilities. The company’s Oil and Gas Infrastructure Services segment provides network solutions to customers involved in the development and transportation of natural gas, oil, and other pipeline products. The company’s Fiber Optic Licensing and Other segment designs, procures, constructs, maintains, and owns fiber optic telecommunications infrastructure, as well as licenses the right to use these point-to-point fiber optic telecommunications facilities to its customers.
Take a look at the 1-year chart of Quanta (NYSE: PWR) with the added notations:

Over the last year PWR has consistently moved higher. Since October the stock has formed a trendline of support (blue) that it has been bouncing on top of. Always remember that any (2) points can start a trendline, but it’s the 3rd test and beyond that confirm its importance. PWR’s trendline seems to be very important now that it has been tested multiple times.

The Tale of the Tape: PWR has created a trendline of support over the last year. A long position could be entered on a pullback to that trend line, which is currently sitting right around $34-35, with a stop placed below that level. A short position could be entered if PWR were to break the trend line support.
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How To Profit From The Coming Propane Crisis

You may not realize this, but propane is about a lot more than just firing up the family grill.
In a very real sense, it’s the lifeblood of the entire rural lifestyle.
In the countryside, propane heats more than six million homes, fuels equipment and vehicle fleets, and is instrumental on farms for drying grain for storage and keeping livestock-filled barns warm in the winter.
But like any fuel, it’s susceptible to shortages that cause unwanted strain on entire rural communities, and decisively raises prices in supermarkets across the country. (more)

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NYSE Margin Debt Storms Back To All Time Highs

A month ago we explained why ordinary margin debt (such as that tracked by the NYSE) is largely irrelevant as it completely ignores the leverage of the largest investor class (aside from the Primary Dealers who use Fed reserves as collateral against which to purchase equity index futures), namely hedge funds and whose leverage blows out ordinary retail investors out of the water. Nonetheless, NYSE margin debt is still useful as an indicator of prevailing retail and less than sophisticated investor leverage, and thus euphoria, in the market.
It is from this perspective that we observe how after dropping modestly from all time highs hit in February, NYSE margin debt has recouped virtually all its losses and is now essentially back to all time highs. And as a parallel to that, investor net worth, defined as total Free Credit Cash and Credit Balances in Margin accounts less Margin Debt, has once again dropped to all time lows.

And while it may represent a mere subset of overall market leverage, it is perhaps worth rereading Deutsche Bank's warning on the topic from a year ago, in which the German bank, embroiled in the latest financial reporting credibility scandal, hopes that "not all margin calls come at one in case of a sell-off."
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