Markets are slightly lower today, but this action is merely a warmup for what lies ahead. Today kicks off a huge week, as there are a Fed decision, ECB decision, the July employment report, and numerous other data points to be released. After a weekend without much major news, volumes are light today, as everyone braces for what could be a significant week. Markets are slightly lower from Friday’s close, with the Russell 2000 lagging, off about 0.7% for the session. The S&P 500 is off by about 0.4%, and the Dow and Nasdaq are each about 0.3% lower. Bonds are dripping lower, off 0.9% on the session, and metals are also down modestly. Much of their price action for the remainder of the week will likely be determined by what is said during Wednesday’s FOMC Policy Statement.
CHART OF THE DAY
Lennar Corp (LEN) – The homebuilder has been very weak lately, as news of potential interest rate increases have caused a spike in mortgage rates, which in turn hurt stocks in the housing space. The shares are trading lower by over 10% since the beginning of the year, and aren’t showing any signs of life. Today, LEN bounced higher toward the 34 level, site of a gap down last week, and failed to retake that area. This could act as resistance going forward. Despite its weak price action, analysts love LEN, as 9 of the 17 analysts covering it have it rated a “buy,” with not a single rating of “sell.” This creates future downgrade potential, which could act as a headwind going forward.
I like a bearish entry here with a stop on a close above 34. I would initially target a move down to 30, with 26 as a stretch target.
WHAT I’M EXPECTING
While I still have an upside bias this week, I’m open for anything and everything. Given there are two central banks set to make policy decisions, the current environment can change in a hurry. I continue to focus on individual stock names and maintain a long bias, but this week’s price action should be very telling. Keep open the possibility for anything.