Hey Oxen Report Readers,
Hope you all are well, had a great Christmas and New Year. The market started ablaze yesterday at the start of 2010, and tomorrow’s rally or fall will be determined mostly by the pending home sales report and vehicle sales. I think for tomorrow, since we are really not sure which way this market will go in 2010, we want to play one of our either/or trades.
Buy Pick of the Day: Ultra/Ultrashort Proshares Real Estate (URE/SRS)
The pending home sales will be getting released at 10:00 AM tomorrow morning. We want to get involved with an ETF that matches the pending home sales report, and the one that will be the most affected by this report will be the Ultra or Ultrashort Proshares Real Estate ETFs (URE/SRS). The pending home sales are projected at a -2.80% decrease for the month of December, which is a cyclical decline since December is a low month for home sales. The housing market has definitely been pretty strong over the past month, but as the new year approaches, we should be cautionary. Reports yesterday that housing prices will continue to drop is a sign that there is still weakness in the market. Until employment gets back on its feet, this market will have problems.
The way we want to play this is that we want to play off the estimates. If the numbers come out anything below -2%, I think we want to pick up shares of SRS. While even a slight beat could bring a brief rise, a large negative number will definitely be pretty detrimental to the housing market considering the success it has as of late. Anything above -2%, and we should look to pick up shares of URE. The transaction will want to be made right at 10:00 AM. Set up trades for both on two different screens, and pick up shares of the corresponding ETF. 
These two ETFs are both in pretty solid positions to make movement. URE is a bit ont he overbought side, but it has come down from highs and has room to move back upwards. SRS has made some movement upwards, but it still has a lot of upside.
The only word of caution I will make is that if URE or SRS is really overvalued, so above 2% or so going into 10:00 AM, this trade may not be as worthwhile.
Since I am doing this story overnight, I am going to only make this one selection. It is very likely though that I will have an Overnight Trade of the Day for you tomorrow.
Entry: URE or SRS based on 10:00 AM Pending Home Sales data – read above.
Exit: 2-3% on upside.
Stop Loss: 3% on downside.
Good Luck and Good Investing,
David Ristau
