Each Monday, I will identify, dissect and deconstruct what are bound to be major stock stories of the coming week. Keep your eyes peeled.
If you have hatches, batten them down. For a few months now, the story line on housing has been that a recovery was at hand, even in hand. Housing stocks rowed merrily along.
But making a case for a housing recovery was always a leap of faith, if not a headlong jump off a bridge. In reality, the housing market is, at best, drifting about. More accurately, it's as troubled as ever.
Last week, evidence started to arrive, but reality rarely gets its meat hooks into traders immediately. Shifts in story lines take place over time. But last week's evidence, harnessed to several earnings reports and statistics due to be released in the coming week, means we are bound to face some heavy revisionism on housing this week.
This will be the week that traders stop flapping their gums about how a turnaround in housing is underway. It's not. And by Friday, they'll wake up to the fact.
All eyes will be upon Lennar (LEN), which will report on Tuesday. Traders are expecting 4 cents down from 14 cents, but this report will echo KB Home (KBH), which reported abysmal earnings on Friday. Worse (though it does not seem metaphysically possible) were the quarter's forebodingly bad cancellation numbers. They rose to 36 percent, up from 29 percent a year ago, when they were thought to be bad. One year's bad problems are another's horrible. The under-performance was blamed on home-sale competition from foreclosures and short sales. The fact that this popped up on traders as a surprise (really? That happens? Duh) shows you how much overdone hope was in the recent happy housing narrative. Plus, there was more to the poor performance that that. New home sales fell 1.6 percent, well below expectations. For good measure, they also fell 9 percent sequentially from January.
But Tiffany (TIF), which looked like a harbinger for the recovery of big-ticket items in the early portion of the year, along with FedEx (FDX), which should have been benefiting from the swell of online shopping, reported earnings last week that sounded alarm bells. And Tiffany and FedEx don't compete with homes under short sale or in foreclosure.
To drive home the troubling point, consumer confidence, durable goods and final estimate GDP numbers are due, as the Federal Reserve speaks in several venues throughout the week. Little solace there.
In housing, this is the week that traders will once again start looking out below.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.