ALSO WATCH HOUSING EQUITY SECTOR STOCKS

Another way for the forex trader to get a grip on housing data is to watch equities that are
housing related. For example, Lennar Homes is a leading home builder. Its stock price
and earning forecasts offer good clues regarding the direction of the housing market and
by inference interest rate policies (Figure 1.3). In April 2006, Lennar homes broke down
below its support at $55 per share. Lennar Homes’ weakness was an omen about the
end of interest rate increases. Interestingly, when the forex market begins to conjecture
whether the Federal Reserve will raise rates in the future, the trader following Lennar
Homes’s stock price or another housing equity leader will be helpful in shaping an opinion
about the likelihood of an interest rate increase.

Here is what the Lennar chief executive officer (CEO) said as 2007 started (Wall
Street Journal, March 1, 2007):
Lennar Corp. (LEN) Chief Executive Stuart Miller is seeing no signs that the deteriorating
home-building market has bottomed, and Lennar expects to take landrelated
write downs of between $400 million and $500 million in its fiscal fourth
quarter to reflect the weak conditions.
“Market conditions continued to weaken throughout the fourth quarter, and
we have not yet seen tangible evidence of a market recovery,” said Miller, in a
statement.


By ABE COFNAS