Blog Posts by Jennifer Carinci

The housing sector was hit with a major setback in the latest new home sales data released on Thursday. The most recent snapshot showed sales slid 2.2% last month compared to November. December's weakness dragged on the entire year, making 2011 the weakest on record for sales of new homes in the U.S., and prices dropped 12.8% year-over-year.

Home Builder Stocks Under Pressure After Weak New Home Sales

Meanwhile, home builder stocks (XHB), a sector up 12% so far in 2012, took a hit on this data, raising questions about the validity of their year-to-date rally. Stocks like Lennar (LEN), Ryland (RYL), D.R. Horton (DHI), Pulte (PHM), and Toll Brothers (TOL) all pulled back roughly 2-3% on the data.

According to Todd Schoenberger, managing director at LandColt Trading, you shouldn't have touched these home builder stocks anyway. He explains in the attached video why the fundamentals of the housing market are still too broken to consider investing in the sector through home building stocks, and through traditional home ownership for that matter.

Schoenberger points to the U.S. homeownership rate which is currently at 66%. He believes this is too high, especially compared it to the historical average of 64%.

"You still have too many people that own homes that should not be owning a home right now," he says. "Those are your toxic mortgages that you hear about."

It's been a wild ride in the energy market this week with crude oil whipsawing around the $100 a barrel mark and natural gas continuing its slide toward ten-year lows. There are several market forces at play keeping volatility high and investors weary.

Tensions over Iran's nuclear development and subsequent threats to close off the Strait of Hormuz has kept oil above $100 a barrel over the last month. But reports that Europe will delay an embargo on Iranian oil imports on Thursday afternoon sharply reversed the short-term trend, sending crude lower by 1.8% to $99.10/barrel.

"20% of the world's oil supply comes through those Straits every day, and any type of restriction on that supply could have a significant impact particularly on Japan and China," says Frank Holmes, CEO of U.S. Global Investors. "Who benefits, is Russia; Russia is the largest exporter of oil, and they would benefit from rising prices."

Holmes says if Europe does ban Iranian oil imports, the impact won't be harsh because high global demand will soak up any extra supply on the market very quickly. He points to Japan, China and even Africa has hungry buyers of crude.

The weaker U.S. dollar has most commodities on the rise today, with exception to Natural Gas, which continues getting pummeled by weaker demand given the mild winter weather and high inventories.

Despite the unusually warm winter, Jeff Hirsch of the Stock Trader's Almanac believes seasonal commodities trades are still intact. For starters, crude oil is already north of $102 a barrel. According to Hirsch, if prices stay this high, it'll exacerbate the seasonal trade and take the overall energy complex higher, as is expected this time of the year.

"Oil stocks start their move seasonally in December, runs through July, plays off the heating season, and gets into the build up for driving season," he says.

Specifically, Hirsch likes the Energy Sector SPDR (XLE), which includes oil majors like Exxon Mobil (XOM) and ConocoPhillips (COP). Weather aside, Hirsch points to the instability in Iran and his more bullish stance on the global economy as drivers of energy prices.

"What happens if the global economy picks up, demand picks up a little bit, and something boils over in one of these places (Middle East)?" he asks. "We'd get a little more upside in oil, and those stocks should benefit from that."

Strong buying demand out of China pushes gold higher for a second day, rising 0.5% to $1,639.60 an ounce. Despite a rise in the dollar index, gold bullishness prevailed on record imports from Hong Kong ahead of the Chinese New Year later this month.

Gold prices are up 2% so far this week, now sitting at a 4-week high. The precious metal also closed above the 200-day moving average of $1,632.69 an ounce; signaling what could be a significant shift in sentiment.

Several major Wall Street firms are expecting prices near or above $2,000/oz in 2012. Here are a few of those gold targets:

Goldman Sachs: $1,940/oz.

Morgan Stanley: $2,200/oz.

Citi: $2,400/oz.

"We predict that $2,400 is a reasonable target for this year," says Donald Doyle, Chairman & CEO at Blanchard & Co. —the largest retail metals dealer in the U.S. "The principle factors that are pushing gold higher now have really been in place for some time."

Click! Follow Us on Facebook!

With a market that only needs a little good news to fuel gains, it's tough to tell how the latest earnings season will impact stocks in the short-term. Alcoa (AA) kicked off the fourth quarter data deluge on Monday afternoon reporting weak results, but in-line with analyst estimates. Every morning and every afternoon through mid-February will bring us news of who beat and who missed analyst earnings estimates, and we'll see instant pre and post-market price reactions.

Breakout decided to take a look at a different data point — Which stocks are most hated and beloved on Wall Street according to analyst buy, sell, and hold ratings. These recommendations typically garner attention only when there's a big upgrade or downgrade of a well-known company. But it's important to know the sentiment of your stocks.

"If you look at the companies that have the largest percentage of sells in the S&P 500 as of today, you're looking at companies that are either expecting significant declines in earnings in 2012 —which would include a company such as Netflix (NFLX) or Washington Post (WPO)-- or companies were maybe valuations have gotten a little ahead of the earnings; companies such as AutoNation (AN) and Hormel (HRL)," says John Butters, senior earnings analyst at Factset.

According to his data, Sears (SHLD) and Washington Post (WPO) have 0% buy ratings --they're what we're calling Wall Street's most hated stocks. Sears is rounded out with 40% hold and 60% sell. That's literally as ugly as it gets. WPO is 50-50, holds and sells. Eek!

"But SELL! No one has sell; sell is an anathema!" exclaims Breakout's Jeff Macke. And he's absolutely right. Sell ratings are relatively rare on Wall Street.

Check out the Factset chart below listing the top 10 highest percentage of sell ratings.

Click! Follow Us on Facebook!

The Santa Claus rally delivered again! Whether you're buying it or choose to ignore seasonal trends, there are very early signs of strength in the market this year according to some widely followed statistics. While the numbers may not change your investments, they're often used as small indicators of where the broader market is heading.

The traditional Santa Claus rally, as defined by the Stock Trader's Almanac is "the propensity for the S&P to rally the last five trading days of December and the first two of January an average of 1.5% since 1950." This year's seasonal gift sent the S&P 500 and the Nasdaq up 1.9%, and the Dow Jones Industrial Average up 1.6% during the seven trading sessions from 12/22/11 through 1/4/12.

"It's the first positive indicator of the year —there are several seasonal indicators," says Jeff Hirsch, president & editor-in-chief of the Stock Trader's Almanac. "It's a good sign; a better sign considering a lot of the risks and negative issues out there, so it helps me be comfortable with the positive outlook for 2012."

And it works both ways. If Santa doesn't deliver, it'll have believers ducking for cover, expecting some degree of weakness to prevail throughout the year.

"If there's something really negative going on and the market's down like in 2000 and 2008, it preceded really nasty markets," Hirsch explains. "It's a sign that there's some lifting of the really negative things out there or that they're already baked into the market."

But this is just the beginning. As Hirsch said, there are several widely followed indicators in January, including the entire month itself.

Another nasty showdown finally ends on Capitol Hill after House Republicans caved into rising political pressure and accepted the Senate's very short-term bill to extend the 2% payroll tax cut for working Americans. Amazingly, most members of Congress weren't even in Washington, DC for this latest battle; they were already home for the holidays after closing out 2011 on a low note.

Needless to say, the New Year promises to bring more contentious battles including, well, the very same payroll tax cut which was only extended for two months, the $1.2 Trillion in automatic deficit cuts (remember the Super Committee failure?), the expiration of the Bush tax cuts, the fate of Consumer Financial Protection Bureau, a Supreme Court ruling on the constitutionality of Obamacare, and efforts to weaken Dodd-Frank financial reforms. All this as a potentially monumental presidential election cycle kicks into overdrive.

So what does this all mean for investors?

"A lot of people look to elections to try to decide which way the stock market is going; I think that's a logical way to think—mechanical causality," says Robert Prechter, founder and president of Elliott Wave International. "Mine is the opposite, I look for mood as the major cause."

Click! Follow Breakout on Facebook!

Despite tumbling as much as 5% earlier today, the CBOE Volatility Index (^VIX) could be the most bullish indicator on the Street. Sometimes referred to as "the fear indicator," the VIX has been in a downward trend through most of December, dropping nearly 10% in the last two last two sessions, and currently inching below it's 200-day moving average of roughly 25.75.

Generally, the VIX gauges the magnitude of coming market fluctuations, what the Street calls implied volatility. The VIX is not only traded directly and serves as a baseline price for calculating other market entities (ie "boring" stock options trade at a lower vol than names subject to bigger daily swings). Typically a falling VIX means options traders expect lower volatility for the broader S&P 500 benchmark, suggesting higher stocks in the short-term.

Big market swings such as we've seen in December are "supposed" to lead to a higher VIX. The curious combination of big moves and shrinking VIX levels has some questioning whether or not it has any predictive value at all.

"I hear a lot of people saying that the VIX is broken, it's not a tell anymore," says Jon Najarian, co-founder of TradeMonster.com. "I say just the opposite, that this is the best reading we've ever seen out of the VIX because a week ago it was screaming from the rooftops that we'd being going down."