The stock market looks like it may be looking for new direction on Tuesday as investors are awaiting pending home sales and the ISM Manufacturing Index for more signs on whether recovery is on the way. Over the past week and a half, the market has had trouble keeping its rally going and continuing to resiliently drive up market prices. The issue has been a lack of data and earnings reportings.
Futures as of 7:30 AM were showing a lower open for the market, with the Dow down nearly 50 points, the Nasdaq was down 11 points, and the S&P was down nearly 6 points. This was somewhat driven by the fact that every European index is down today, and the Asian rally seen this morning was too modest to create any influence on the American markets. Europe was hit hard due to unemployment rising to its highese level in ten years and nearing the 10% mark.
Oil rose just ever so slightly in Asia today back above $70 per barrel. Most analysts seem to agree that oil is definitely stuck in a slight rande with $65 per barrel on the low side and the low $70s on the high side.
It still was another rather uneventful morning in the slow doldrums of the September month, which is notoriously one of the weakest months of the year.
Credit Suisse upgraded Vale ADS (VALE), who is a Brazilian mining company that mines and produces metals, but other than that, it was a pretty quiet morning. We will just have to sort of wait and see what comes out on the data front before being able to make any decisions on stocks and where the market is headed. The question is whether or not good data can really transform the market from red to green.
Buy Pick of the Day: Ford Motors Co. (F)
In the past two weeks, Ford Motors has been pretty stagnant with not too much news coming out post-Cash for Clunkers. 
The stock has dropped about 10% over the two week period, and it is starting to become undervalued. Today, Ford and other auto companies will be announcing their August total auto sales throughout the day. The "Cash for Clunkers" program should have definitely helped the July Sales for Ford, but how greatly is yet to be seen. The positive about the whole issue is that investors have not been running the stock up in value going into today’s announcement, which means that the stock has a lot of buyers on the sidelines and a lot of opportunity.
Barclays commented that they think Ford’s auto sales increased by 53% from one year ago in August. While the sales’ increases are short lived and in the short term, the trade we are looking to make is short term as well. I would never recommend this stock if it hadn’t had the type of pull back we have seen in the stock lately and its loss of momentum. Therefore, at the start of the day, you can get the stock for a bargain price while momentum builds going into and out of what should be a very bullish announcement from the automaker.
Technically, Ford is undervalued, oversold, and near its lower bollinger band. The stock is a laggard in the market currently, 
and therefore, it is in a perfect position for a significant move. With over 600,000 cars sold in August, Ford had to get a solid market share. Even if they increased less than 53%, any positive number and news for this company will bring investors back to the table. Long term, one may worry about a lot of the issues of this program and its future effects on the company’s sales. However, if we are concerned with just today, is it a positive or negative?
Sell Pick of the Day: Lennar Corp. or Ultrashort Proshares Real Estate ETF (SRS)
Futures have come down just slightly from earlier in the day, but they are still showing a lower open for the markets. Up until 10 AM, this is better for SRS. I wouldn’t, though, want to be getting into this stock because I think the movement will be very low and the pending home sales is anyone’s guess. They are supposed to increase, but a miss would be a disappointment. A better than expected gain in the data would mean an immediate reversal of SRS’ direction. It is very hard to tell which way this will end up going.
Once the news does come out at 10 AM, it will definitely have a large influence on the direction of housing stocks and ETFs. At that point in time, we can play these stocks for short sales. If the data is worse than expected, we want to make our short sale Lennar Corp. (LEN). This stock is extremely overvalued, near its upper bollinger band, and overbought. Bad data would quickly create sellers. SRS, on the other hand, has stabilized its downward movement as of recently. The ETF even found positive ground yesterday. The ETF is so fickle that it could give up any gains and drop 5-6% today if the data on pending home sales comes out better than expected.
To short SRS you could also just buy the inverse ETF of SRS, Ultra Proshares Real Estate ETF (URE). SRS is actually more concerned with REITs and corporate real estate in its makeup, but it is highly influenced by movements in the market and the residential construction and sales sector.
I would set up a short order for either of these and right at 10 AM when the news comes out, place your order and close the other one out. In this way, you will get an excellent entry price and be able to ride the wave of positive or negative news as investing interest moves into the stock or ETF.
Good Investing,
David Ristau
