[note: the DJUSHB Dow Jones Home Construction Index has hit a new low on the day since I posted this report – it’s down
almost well over 2% nearly 3% now]
Despite what seems to be an inexorably rising stock market, the homebuilder stocks continue their negative divergence from the direction of the general market. In fact, the homebuilder stocks dropped over 1% at today’s market open despite another unexplained “pop” in the S&P 500.
The message of the market is unmistakable: the housing sector is tanking (click to enlarge).
This is despite the fact that 30-yr mortgage rates have come down to their lowest level in a year. That fact that buyers are disappearing is reflected in today’s mortgage purchase applications report from the Mortgage Bankers Association which showed another 2% drop in applications files vs. the previous week and a 12% plunge from a year ago.
The message: This is NOT the healthy housing market in recovery that the industry associations and Wall Street pimps are trying to sell to us.
How take advantage of this? You can short homebuilder stocks. I have two reports which explain why these respective companies will drop over 60-70% over the next year or two. I expose accounting fraud, earnings management and disclosure lies. You can access the reports here: Homebuilder Short Ideas.
In the second report I included a section which outlines options trading strategies which enable you to play the downside view without shorting stock, in case you are not comfortable shorting stocks outright.
I’m one of the very few market analysts/traders who is exploiting this obvious market play. This means that you can get in early before the big money dumps longs and hedge funds pile into the short side.