Forex Investment

Watch today’s Markets Desk video.

The market doesn’t need much reason to fall when it’s in a correction. So when Goldman Sachs () warned that Citibank () may have to write off $15 billion in mortgage losses, you knew what sort of day we would see.

The New York composite fell 2.1%, the S&P 500 and the Dow 1.7%. Volume decreased on the NYSE.

These indexes fell to new lows for this correction. But the Nasdaq barely held above its Nov. 12 worst. So its rally attempt is still alive by the narrowest of margins.

Wimm-Bill-Dann Foods, () a Russian distributor of juices and dairy products, slumped 14.14 to 120.48 in more than twice its average activity. The company’s profit growth has slowed to just 15% in the latest quarter from 458% in last year’s Q2.

GameStop () fell 2.01 to 52.99 in fast trade. The chain of video game stores will report Tuesday. The Street is looking for 23 cents a share on $1.42 billion in sales.

BHP Billiton () slipped 3.89 to 70.84 in slightly above-average trade, while Freeport-McMoRan Copper & Gold () fell 7.54 to 92.50, also in busy trade. Both those miners had notched huge gains with the hot market for metals.

But the slowdown specter cast a pall on those markets. Copper, which got as high as $3.78 a pound on Oct. 5, closed Monday at $3. Dec. gold has slid 8% from its Nov. 7 high.

A few stocks bravely bucked the downdraft.

Intercontinental Exchange () climbed 5.21 to 180.25 in above-average trade.

The company, an electronic futures exchange, has seen its profit growth decline for three straight quarters. Views for the current period, 15%, would be the fourth deceleration.

Type the words “falling housing prices” into Google and more than 8 million citations pop up. Michael Youngblood’s name won’t be among them. Despite all the fear that single-family home prices will decline, the managing director of asset-backed securities research at Friedman Billings Ramsey & Co. ( ) in Arlington, Va., thinks residential real estate is a lot stronger than most people suspect. He bases this assessment on a new economic model he created that forecasts housing prices in 379 metropolitan statistical areas. Associate Editor Toddi Gutner spoke with Youngblood about his upbeat view and his surprising prediction that the greatest price appreciation will be coming in so-called bubble markets.

What makes you more optimistic than other housing experts?
I look at two economic indicators that I think drive the housing market: the growth in employment and the growth in personal income. Getting a job or a salary increase is what motivates people to buy their own home. This is different from the data the National Association of Realtors and other organizations rely on. They are more concerned with technical indicators such as the inventory-to-sales ratio and the number of months a house is on the market. These aren’t leading indicators. Instead, they move with current changes in the market, rather than predict those changes.

Do you think the housing bubble argument is overblown?
Absolutely. It’s overblown because there is no national housing market, so there can’t be a national house-price bubble. However, there are bubbles in 75 of the 379 markets I studied. A bubble exists when the ratio of the median existing house price to per capita personal income exceeds 6.8 times. This definition is based on historical data of when other markets, like Houston and Boston, had bubbles.

Where are the bubbles?
Most of the bubbles exist on the East and West coasts in such markets as New York City, Los Angeles, Washington, Phoenix, Honolulu, and Tacoma, Wash. Only 12 of the 75 cities are located inland: Boulder, Colo., Coeur d’Alene, Idaho, Flagstaff, Ariz., and Las Vegas among them.

What markets are likely to show the biggest price gains and declines this year?
We expect the greatest gains in Bakersfield, Calif. (43%), Fort Myers, Fla. (42%), Stockton, Calif. (39%), and Punta Gorda, Fla. (35%); the biggest declines in Harrisburg, Pa. (8%), Odessa, Tex., Roanoke, Va., and Utica, N.Y. (all 6%).

But most people think that Florida and California are overpriced. Why would markets there show the greatest gains?
There is clearly speculation taking place in these areas. But bubbles can persist for very long periods of time, and it typically requires a downturn in the local economies to burst them. Then they can deflate for a long time, too. Given the expected gains in employment and income in both states, I don’t expect the housing prices to fall in 2006.

How can investors play this information?
Investors should not necessarily fear homebuilders who are operating in bubble markets. House prices don’t plunge immediately in economic downturns the way stock prices do. There is typically a one-year lag after the local economy sees a decline in average employment and income. Thus, the homebuilder stocks may continue to perform well for a while longer.
READER COMMENTS

(12-18) 22:11 PST Newark, N.J. (AP) —

Fallout from the housing downturn and an accounting charge helped Hovnanian Enterprises Inc.’s fiscal fourth-quarter loss nearly quadruple, but the homebuilder’s chief executive says there are some encouraging signs.

Despite the net loss of $469.3 million, the company generated $376 million of positive cash flow from operations in the quarter that ended Oct. 31 and projects that it will have more than $100 million in cash flow from operations in fiscal 2008.

“Considering the challenging market conditions that homebuilders are continuing to face, we are pleased to have exceeded our expectations for cash generation in the fourth quarter and to have paid down our debt levels more than we projected,” President and Chief Executive Ara K. Hovnanian said in a statement.

The industry is in a slump, “However, after a very slow period for new sales contracts in October and November, we have experienced an improvement in sales pace during the first three weeks of December. This is encouraging given that December is historically a slower sales month,” he said.

Red Bank-based Hovnanian, which operates in 19 states, reported its fifth consecutive quarterly loss Tuesday. Its fourth-quarter net loss of $7.42 per share after paying preferred stock dividends compares with a loss of $117.9 million, or $1.88 per share, for the same period a year ago.

Hovnanian said an accounting determination resulted in a $54 million tax expense in the most recent quarter instead of an expected $162 million benefit, for a $216 million swing.

Quarterly revenue fell 20 percent to $1.39 billion from $1.75 billion in the same period last year.

Analysts surveyed by Thomson Financial, who apparently did not factor the accounting charge, expected Hovnanian to lose $1.49 per share in the quarter on revenues of $1.32 billion.

In addition to the accounting charge, Hovnanian incurred $383 million in quarterly pretax charges for land impairments and other items. It was not known if the analysts expected that amount, said Jeffrey T. O’Keefe, Hovnanian’s director of investor relations.

Hovnanian and other homebuilders have been struggling amid the subprime mortgage fallout, as a record number of foreclosures has made it harder to get loans, weakening the housing market. Earlier this month, Toll Brothers Inc., the nation’s largest builder of luxury homes, reported its first quarterly loss in 21 years.

The Commerce Department reported Tuesday that construction of single-family homes in November sank to the lowest level since April 1991.

Hovnanian shares rose 5 cents to $8.45 in after-hours trading, having closed earlier up 45 cents, or 5.7 percent, at $8.40. The stock has steadily declined from a high of $37.58 to a low of $6.75 over the past year.

The company will not pay dividends on its Series A preferred stock in fiscal 2008 because of indentures on senior and senior subordinated notes, J. Larry Sorsby, executive vice president and chief financial officer, said in a statement.

Hovnanian said its net contracts for the fourth quarter, excluding joint ventures, fell 10 percent to 2,781. The dollar value of net contracts decreased 13.6 percent to $875 million from $1.01 billion in the year-ago quarter. Hovnanian’s contract cancellation rate grew to 40 percent from 35 percent last quarter and in the fourth quarter a year ago.

For fiscal 2007, after paying preferred stock dividends, the company reported a loss of $637.8 million, or $10.11 per share, compared with a profit of $138.9 million, or $2.21 per share, for the prior fiscal year.

Annual revenue fell 22.4 percent to $4.58 billion from $5.9 billion in fiscal 2006.

Net contracts for fiscal 2007, excluding joint ventures, fell 20 percent to 11,006. The dollar value of net contracts decreased 22.6 percent to $3.84 billion from $4.97 billion last fiscal year

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On the Net:

Hovnanian Enterprises Inc.: «www.khov.com»

The value of building permits issued by Canadian municipalities in November slipped 6.6 per cent from the previous month to $6.03 billion, reflecting declines in both the residential and non-residential sectors, Statistics Canada said Thursday.

The federal government agency said building intentions in the non-residential sector fell 17.5 per cent from October to $2.17 billion in November. A rise in industrial construction intentions was not enough to overcome strong decreases in the commercial and institutional components.

The residential sector saw a decline offive per cent in building permits obtained in November to $3.86 billion.

Statistics Canada said a slight gain in single housing could not make up for a dive in the multi-family component, which includes condominiums. Municipalities approved 19,659 new units, down 4.3 per cent from October.

“Strength in employment, growth in disposable income, tight apartment vacancy rates in certain centres and attractive financing options continued to affect positively the housing sector,” the agency said. “However, the deterioration of housing affordability due to the growth in prices for new housing and the recent increases in mortgage rates could erode demand.”

On a year-to-date basis, the total value of building permits issued by Canadian cities from January to November hit $68.13 billion, up 12.4 per centcompared withthe first 11 months of 2006. This total was also 2.8 per cent higher than the previous annual record of $66.3 billion set in 2006.

Action Insight | Written by ActionForex.com | Aug 20 07 13:34 GMT |
Forex Mid-Day Technical Report More Consolidation in Cautious Sentiment

Yen’s retreat continues but intraday momentum is seen diminishing as markets enter into US session. There isn’t any catalyst for further volatility from the stock markets as they opened nearly flat in US, despite rebound in Asia and Europe. The only economic data from US is the conference board leading indicator which rose 0.4% in Jul. Further consolidation is likely, probably until tomorrow’s German ZEW index. EUR/USD

Daily Pivots: (S1) 1.3381; (P) 1.3463; (R1) 1.3557; «www.actionforex.com»

Not much to add. EUR/USD engages in choppy sideway trading in tight range below 1.3545. Intraday bias remains mildly on the upside as long as 1.3482 minor support holds and further rebound to 4 hours 55 EMA (now at 1.3567) could be seen. But upside is expected to be limited below 1.3642 support turned resistance. Below 1.3431 minor support will turn intraday bias back to the downside for 1.3360 low and then a retest of 1.3328/29 cluster support.

In the bigger picture, rise from 1.2483 has completed at 1.3851 already, with bearish divergence conditions in daily MACD and RSI. The current development is reviving the case that whole up trend from 1.1639 (05 low) has completed after three waves up to 1.3851. That is, first move completed at 1.2978, subsequent consolidation completed at 1.2483 and rise from 1.3483 ended with five waves up to 1.3851. Also, 100% projection of 1.1639 to 1.2978 from 1.2483 at 1.3822 is just met.

Having said that, sustained break of 1.3328/29 cluster support (38.2% of 1.2483 to 1.3851 at 1.3328 and 23.6% retracement of 1.1639 to 1.3851 at 1.3329) will add much credence to such case. The current fall from 1.3851 is not expected to stop here and instead it’s expected to extend further to support zone between 1.2978 (medium term resistance turned support) and above mentioned 1.3006 cluster support (61.8% of 1.2483 to 1.3851 at 1.3006 and 38.2% retracement of 1.1639 to 1.3851 at 1.3006) before turning into lengthier consolidation. However strong rebound from 1.3328/29 cluster support and a break above 1.3642 will dampen the above view.

GBP/USD

Daily Pivots: (S1) 1.9663; (P) 1.9799; (R1) 1.9947; «www.actionforex.com»

Similar to EUR/USD, Cable continues to consolidate in tight range below 1.9935 today. At this point, intraday bias remains mildly on the upside as long as 1.9737 minor support holds. Further recovery could be seen towards 4 hours 55 EMA (now at 2.0025). But upside should be limited below 2.0156 support turned resistance and bring another fall. Below 1.9737 will bring a test of 1.952 low and probably 1.9621 support too.

In the bigger picture, break of rising trend line support (1.9183, 1.9621) indicates that a medium term top should be in place at 2.0652 already, after failing to break through important 2.0677 target (61.8% projection of 1.3680 (01 low) to 1.9554 (05 high) from 1.7047 (05 low) at 2.0677). Bearish divergence condition is seen in both daily and weekly MACD too. Initial support could be found at between 55 weeks EMA (now at 1.9524) and 1.9621 low. However, sustained trading below this level will encourage add more credence to the case that whole up rally from 1.7047 has completed too and bring deeper decline to next support zone of 1.9183 and 38.2% retracement of 1.7047 to 2.0652 at 1.9275 first. Meanwhile, a break above 2.0156 support turned resistance will dampen the above view.

Also, note that regardless of the internal structure, the whole rally from 1.7047 represents resumption of the long term up trend from 1.3680. Even though much deeper correction could be seen, the trend will still remain intact as long as long term rising trend line support (1.3680, 1.7047, now at 1.8327) holds.

USD/CHF

Daily Pivots: (S1) 1.1988; (P) 1.2083; (R1) 1.2173; «www.actionforex.com».

USD/CHF continues to consolidate between 1.1993 low and 1.2112 resistance. As discussed before, further decline is in favor as long as 1.2112 minor resistance holds. Below 1.1993 will encourage a retest of 1.1816 low. Meanwhile above 1.2131 will bring retest of 1.2232 resistance and bring will put 1.2467 high into focus.

In the bigger picture, outlook is turned mixed after the strong rebound from 1.1816 dampened our original view that USD/CHF has completed a wide range triangle consolidation that started at 1.1919. There are various interpretation of the medium term price actions that started at 1.1919 (May 06) but none of them is really convincing yet.

Nevertheless, USD/CHF has had a series of lower highs since Nov 05, ie 1.3823, 1.3238, 1.2768, 1.2571 and then 1.2467 in June. Such pattern is still holding and the medium term outlook is still remaining mildly bearish and neutral at best. It will take a break above 1.2467 high to indicate USD/CHF has made an important low at 1.1816 and have the medium term down trend from 1.3283 reversed.

USD/JPY

Daily Pivots: (S1) 112.34; (P) 113.62; (R1) 115.64; «www.actionforex.com»

USD/JPY’s rebound from 111.59 continues today and extends to above 115 level but fails to hold firmly above yet as intraday momentum is seen diminishing. But still, intraday bias remains on the upside as long as 113.26 minor support holds. However, upside is expected to be limited below 117.15 support turned resistance. Below 113.26 will bring retest of 111.59 low and break will bring another fall towards next medium term target of 108.99 (06 low). Above 114.63 will indicate stronger rebound is underway first.

In the bigger picture, decisive break of long term rising trend line (101.65, 108.99, now at 116.21) indicates the the whole up trend from 101.65 could also have completed at 124.13 already, with bearish divergence condition in daily MACD and RSI. Also, note that 55 Months EMA (now at 115.56) was also taken out too. The current decline is expected to extend further to support zone between 108.99 and 61.8% retracement of 101.65 to 124.13 at 110.23 before turning into lengthier consolidation.

In the longer term picture, the three wave structure of the up trend from 101.65 to 124.13 suggest that it’s corrective in nature. Suggest development flipped favor to the case that the rally from 101.65 could indeed be the final leg of a long term triangle formation (147.68, 101.22, 135.20, 101.65, 124.13). The break of falling trend line (147.68, 135.20) was merely a throwover in the last leg. Sustained trading below 108.99 low will add more credence to this case and put key long term support zone of 101.22/65 into focus.

EUR/JPY

Daily Pivots: (S1) 150.47; (P) 152.88; (R1) 156.50; «www.actionforex.com»

EUR/JPY’s rebound from 149.27 continues but intraday momentum is seen diminishing. Nevertheless, intraday bias remains on mildly on the upside as long as 151.68 minor support holds. However, upside should be limited by 159.97 support turned resistance and bring another fall. Below 151.68 minor support will bring retest of 149.27 and break will bring further decline to mentioned 145.24 fibo support

In the bigger picture, the break of trend line support (137.16, 150.75) confirmed that rally from 130.60 has already completed at 168.93, with bearish divergence condition in weekly RSI. Current sharp fall from 168.93 is not considered completed yet and further decline is expected towards 61.8% retracement of 130.60 to 168.93 at 145.24 before turning into lengthier consolidation.

In the longer term picture, it’s still early conclude that rise multi year up trend from 88.97 has also completed since EUR/JPY is still supported within the rising channel shown in the monthly chart (support at 146.62). However, sustained trading below this channel, coupled with a break of mentioned 145.24 fibo support, will indicate that the multi year up trend from 88.97 has also ended. Much deeper decline should the be seen to 55 months EMA (now at 142.49) first.

Forex News Digest

«www.bloomberg.com»

«www.bloomberg.com»

«www.bloomberg.com»

«www.bloomberg.com»

«www.bloomberg.com»

«www.bloomberg.com»

«c.moreover.com»
Mon, 20 Aug 2007 12:59:00 GMT from Yahoo! Singapore

«c.moreover.com»
Mon, 20 Aug 2007 12:17:00 GMT from Reuters

«c.moreover.com»
Mon, 20 Aug 2007 12:14:00 GMT from International Herald Tribune

«c.moreover.com»
Mon, 20 Aug 2007 11:38:00 GMT from Reuters

«c.moreover.com»
Mon, 20 Aug 2007 11:18:00 GMT from International Herald Tribune

«www.actionforex.com» Economic Indicators Update
GMT Ccy Events Actual Consensus Previous Revised
23:01 GBP U.K. Rightmove hse prices M/M Aug 0.60% N/A 0.30%
23:01 GBP U.K. Rightmove hse prices Y/Y Aug 12.80% N/A 10.30%
07:15 CHF Swiss Combined PPI M/M Jul 0.10% 0.30% 0.00%
07:15 CHF Swiss Combined PPI Y/Y Jul 2.80% 2.90% 2.80%
08:30 GBP U.K. PSNCR M/M Jul -13.1B -11.0 B 10.34 B 10B
14:00 USD U.S. Leading indicators Jul 0.40% 0.30% -0.30%

«www.actionforex.com»