danielosborne's  Instablog

As we head into the summer months, it was another week of some positive but mostly mixed or downbeat economic news culminating on Thursday with a slew of economic data releases that sent the market into a tailspin. Here is a quick wrap-up of what was reported:

• Homebuilder Confidence Rises. On Monday, it was reported that the National Association of Home Builders/Wells Fargo confidence index rose to 29 from a revised 28 in May to reach its highest level since May 2007. Apparently, less expensive properties and record-low mortgage rates are fueling demand and encouraging homebuilders to take on new projects but any sustained momentum will depend on access to credit while more foreclosures keep adding to the supply of homes.
• May Housing Starts Fall While Permits Rise Sharply. On Tuesday, the Commerce Department reported that new housing starts for May fell 4.8% to a seasonally adjusted annual rate of 708,000 units while new housing permits rose 7.9% to the 780,000 level - a near four-year high. Its worth noting that new housing starts data is subject to significant revisions and April's data were revised upward to the 744,000-unit level from a previously reported 717,000 unit rate for the highest reading since October 2008.
• Existing Home Sales Fall. On Thursday, The National Association of Realtors reported that existing home sales fell 1.5% to an annual rate of 4.55 million units in May - in line with analysts' expectations. However, the median price for home resales rose 7.9% year over year to $182,600 in May to reach its highest level since June 2010 due to a shortage of lower priced homes.
• Jobless Claims Fall Slightly. The Labor Department reported that jobless claims fell slightly by 2,000 to fall to 387,000 claims but the four-week average rose by 3,500 to 386,250 claims. In other words, the labor market remains weak and there was nothing in the latest claims figures to suggest its going to get better any time soon.
• Manufacturing in the Philadelphia Region Sinks. The Federal Reserve Bank of Philadelphia's reported that their general economic index fell from minus 5.8 the previous month to minus 16.6 in June for the lowest level since August as manufacturing slows. Ironically, the region's manufacturers grew more optimistic about the future as the index of the outlook for six months improved from 15 to 19.5 in May.
• Manufacturing Slumps in Europe and Appears to Be Contracting in China. Finally, London-based Markit Economics has given an initial estimate that shows Euro-area manufacturing output shrinking at the fastest pace in three years in June as Europe's debt crisis continues. Moreover, HSBC Holdings Plc and Markit Economics has given a preliminary reading of 48.1 for the Chinese purchasing managers' index. Given that any reading below 50 indicates contraction, it appears that manufacturing in China is also slowing.

It appears that the poor manufacturing data more than anything else is what sank the markets on Thursday and why Goldman Sachs is now recommending that clients build short positions in the broad S&P 500 index based on expectations of continued economic weakness. In other words, traders and investors alike may be in for a long hot summer. Hence, be sure to check NextCandle.com every day for our latest stock market predictions as volatility can also mean profits for savvy investors and traders alike.

NOTE: THIS PIECE WAS JUST POSTED ON THE NEXTCANDLE.COM BLOG.

Homebuilder stocks were rallying on Monday on optimistic news about homebuilder confidence while housing data released today was more mixed and other recently released data has been anything but positive. So what in the world is going on with the housing market and is now the time to get serious about homebuilding stocks? Consider the following:

• May Housing Starts Fall But Permits Rise Sharply. On Tuesday, the Commerce Department reported that new housing starts for May fell 4.8% to a seasonally adjusted annual rate of 708,000 units (Note: This figure is prone to significant revisions) but new housing permits rose 7.9% to the 780,000 level - a near four-year high. Nevertheless, April's housing starts were revised upward to the 744,000-unit level from a previously reported 717,000 unit rate for the highest reading since October 2008.
• Homebuilder Confidence Rises. On Monday, it was announced that the National Association of Home Builders/Wells Fargo confidence index rose to 29 from a revised 28 in May to reach its highest level since May 2007. Cheaper properties along with record-low mortgage rates are fueling demand as well as encouraging homebuilders to take on new projects. On the other hand, any continued momentum could take time as access to credit remains limited while more foreclosures keep adding to the supply of homes.
• Foreclosure Filings Spike Higher. Last week, RealtyTrac reported that foreclosure filings in May spiked 9% compared with the previous month as 205,990 properties in the US received filings that ranged from default notices, scheduled auctions and bank repossessions. May was also the first monthly rise since January. To make matters worst, there was also a 12% jump in foreclosure starts while bank repossessions rose steeply by 7% to 54,844 after hitting a four-year low in April.

Of course, it's rising foreclosures and hence a rising supply of homes that investors in homebuilder stocks must be worried about. On the flip side, not every home buyer is looking for a really good deal on a foreclosed home that may have dated appliances and in need of a renovation. Moreover, the US housing market is really a patchwork of housing markets with some, particularly those in the South and West, being hit much harder than others by foreclosures but many homebuilder stocks are also national players with exposure to both good (if there is such a thing) and bad housing markets.

Nevertheless, the SPDR S&P Homebuilders ETF (XHB), which attempts to match the returns of the S&P Homebuilders Select Industry Index, is up over 21% since the start of the year, up 19% over the past year and up 30% over the past two years but still down over 37% over the past five years. Those recent returns are hard to ignore but so is the sheer number of foreclosures that continue to hit the market.

Hence, investors without a strong stomach for risk may just want to sit on the sideline with homebuilder stocks while those looking to get in should keep the SPDR S&P Homebuilders ETF (XHB) along with a few homebuilder stocks on their NextCandle.com My Portfolio screen in order to keep an eye on them.

NOTE: THIS PIECE WAS JUST POSTED ON THE NEXTCANDLE.COM BLOG.

Airlines, shipping and newspaper stocks have been notoriously volatile in recent years - especially with the uncertain economy. Nevertheless and on Friday, NextCandle.com gave the following stock predictions for stocks in these sectors:

• Spirit Airlines (SAVE) had an 80% probability of making a higher high.
• Diana Containerships (DCIX) had an 88% probability of making a lower low.
• The McClatchy Company (MNI) had an 81% probability of making a lower low.

And the results on Friday when the market closed:

• Spirit Airlines (SAVE) opened higher at $18.95, had a trading range of $18.78 to $19.20 for the day and closed 0.95% higher at $19.03. Spirit Airlines (SAVE), which provides air services throughout the United States, the Caribbean and Latin America, was one of the few airline stocks moving higher as US Airways Group (LCC) fell about 4.3% and Delta Air Lines (DAL) fell 3.4% to drag down much of the airline sector.
• Diana Containerships (DCIX) opened at $7.39 and immediately sunk lower. However and by 11 am, Diana Containerships (DCIX) had rallied back to its opening rice, put in a range of $7.30 to $7.49 for the entire day and closed 0.40% higher at $7.45. Diana Containerships (DCIX), which is based in Greece and owns and operates eight containerships in the beaten down shipping sector, recently announced that it expects to pay a dividend of 30 cents per share for the second quarter, up from 25 cents in May thanks to earnings having been boosted by higher time-charter revenue and a bigger fleet size. Otherwise, Diana Containerships (DCIX) already has a forward dividend of $1 for an already dividend yield of 13.5%.
• The McClatchy Company (MNI), which had closed at $2.08 on Thursday, immediately opened lower at $2.05, had a trading range of $1.05 to $3.04 for the day and closed down 0.48% at $2.07. The McClatchy Company (MNI) offers an array of print and digital products plus it owns stakes in CareerBuilder.com, Cars.com, Apartments.com and HomeFinder.com. However, The McClatchy Company (MNI) is down about 925 over the past five years and more than 96% over the past ten years as it, like other newspaper stocks, struggle to figure out a new business model.

In other words and if you trade stocks like Spirit Airlines (SAVE), Diana Containerships (DCIX) and The McClatchy Company (MNI) in the volatile airline, shipping and newspaper sectors, NextCandle.com would have helped you to have a profitable Friday.

NOTE: THIS PIECE WAS JUST POSTED ON THE NEXTCANDLE.COM BLOG.