Homebuilders close down over 1% after early knee-jerk data bounce.
I’m not wrong on my bearish housing market call. I’ve perhaps underestimated the ability of the Fed and Wall Street to manipulate, obfuscate and fabricate the actual data. But the homebuilder stocks are not buying today’s “seasonally adjusted and annualized” number published by the National Association of Homebuilders – click to enlarge:
The above graph shows the intra-day (1-minute) trading action of the Dow Jones Home Construction Index today. There was a huge sell order at the open (big red bar on the left side) followed by a grind higher into the 10:00 a.m. EST release of the report. Someone had an early glimpse at the report as there is a big green bar with some volume at 9:58 a.m. EST. The DJUSHB rallied up to its high of the day of 579.61.
The homebuilders began to sell-off right after it hit that level. The S&P 500 has held steady most of the day and 10yr Treasury rates are slightly lower today. Homebuilder stocks have sold off because the market sees through the statistical games being played by the NAR. Furthermore, the Chicago Fed National Activity Index (per my earlier post) shows that consumption and housing declined in February. Whom do you trust less – the Fed or an organization (NAR) that functions as the cheerleading section for the housing industry?
I’ll have more in-depth analysis of today’s existing home sales report later. But the homebuilder stocks are more overvalued now than they were at the peak of the big housing bubble. You can take advantage of this with my homebuilder research: Homebuilder Equity Reports.
I show in detail how the homebuilders are using misleading accounting to make their reported income look higher than it really is. A couple of them are losing money when you back out the b.s. accounting tricks. All of them are bleeding cash. Interestingly, more housing analyst bears are starting to show up on Seeking Alpha. I was early but I am right.