Homebuilders on the Radar Again

We’ve seen soft action this morning; nothing too crazy. We tested above the 1400 level in the S&P yesterday, and we’ve dropped back into the low 1390s this morning, which is too be expected. The oscillator climbed pretty rapidly into the +25 range, hinting at a bit of a pullback. At the open, we will have dropped down to just above zero. I think a few days of consolidation is really healthier heading into August, as a parabolic move upwards would eventually deplete buyers and lead to a rash of selling.

There are a few earnings that I think everyone should watch this morning. PCLN is off $103 after a poor report, which sounds crazy but is only about 15%. I think it will end up acting a lot like CMG did after its poor earnings announcement. It’s another high-priced growth stock, just like Chipotle. You may be able to find some short day trades, but nothing longer than that.

We’re also continuing to see continued sector rotation, so I’m looking at the homebuilders again. A lot of people don’t like to trade them, but I think it’s an important sector for everyone to watch.

That being said, it is August, so a lot of big money is on vacation. Keep things light and stay tactical as the month continues.

By Marc Sperling

Disclosure: Marc Sperling is long ANTH, TSPT, LVS calls, GMCR, FB calls, WDC, SNDK, GTAT, LULU calls, RYL, TOL, VRNG, FSLR, DSS, CTRX calls, FSLR calls, FIO, CMG, LNKD, AMZN, AAPL, LEN, GLD, KORS, and MNST, and short SPY

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