Well that was like shooting fish in a barrel.

There are days I love being short. That's good too, since there are also days I've bled from every orifice shorting things.

This isn't one of the bloody ones for me, but it sure is if you're a long bagholder in Lennar - or one of those poor fools who thought Hovnovian (or some other builder) ought to be higher because its "trading under book value."

"President and Chief Executive Stuart Miller said, "The housing market has continued to deteriorate throughout the second quarter" and "the supply of new and existing homes has continued to increase, resulting in declining home prices across our markets."

No, really? Gee, that was tough to figure out. NOT.

Reading Lennar's quarterly report should be instructive as to why that sort of trading is a really, really bad idea. See "tangible book" can get written down awfully damn fast, and then poof - your thesis evaporates!

There's a lesson in here which is that trying to analyze a company on fundamentals requires that you determine the quality of those fundamentals - not just reading a 10Q an parroting whatever you might find there as a thesis.

By the way, the salient piece from Lennar is that they think next quarter will be bad too, and they expect yet another loss. Expect their stock to get pounded today; its off a buck and a half in premarket.

What's even worse here though is the magnitude of the miss and what it says for so-called "analysts." The "predictions" were for a profit of a nickel or so. The truth was a dollar fifty loss, and even if you take out the impairments (which anyone should have been able to see coming a mile away) you still had a loss on an operating basis.

The latter is really bad, because it means that they can't sell their finished product for more than they have in it, and are being forced to sell below fully-laden cost to keep themselves out of covenant trouble!

Ok, enough of Lennar; you guys know by now that I think the builders are all screaming shorts, although you might be a bit late to the party here.

While the futures are pointing up this morning, don't let it fool you. The ICSC CHAIN STORE INDEX came in DOWN 0.7% today and Redbook came in down 1.0% (from previous -0.8%) which confirms my thesis - yet another piece fitting nicely into the puzzle.

TO PUT THIS IN BIG BOLD LETTERS - CHUCKY THE CONSUMER IS FALLING OFF A CLIFF!

Let's fit it all together for you.

• Household formation WAY DOWN - 20-somethings and 30-somethings are moving back in with Mom and Dad or taking roommates. Why? They're going broke!


• Credit card debt spiked to the moon in the first quarter, and is now contracting. Why? Its called credit limits and the MEW-ATM was shut down on people in 4Q 06. The consumer tried to hold spending using plastic, but you can't do that for very long. See above for what comes next and is happening now.


• ICSC Chain Store Sales came in down 0.7% .vs. previous month at negative 0.1%. Last month this was blamed on the Easter Shift and bad weather. This month that excuse rings hollow. Redbook also came in down 1% as a confirming indicator.


• Best Buy and Circuit City had crap earnings, confirming the above.


• June Dallas Fed Mfg Production Index yesterday came in down strongly at 14 .vs. 25 last month.


• Target same-store sales came in weak, seen at low end of forecast.

Whistling past the graveyard, we are..... I smell a word that starts with an "R".....

Consumer confidence came in at 103.9, below forecast of 105. Bad bad bad. What is worse is that the confidence internals show deterioration in the job picture. Yet another page in the big story entitled "Chuckie Craps The Bed."

New home sales are down 1.6% in May. They also revised April down. Months of inventory were also up. Median price was up slightly, but this is no surprise - the higher end is selling, but the middle market and lower end is not.

The instant reaction in the markets was up - but it was yesterday too. Within minutes, the "instant pop" faded and reversed. Not so good.

Case-Schiller's index of prices in real estate have also declined. The salient 10-second quote?

""No region is immune to the weakening price returns," MacroMarkets Chief economist Robert Shiller said in a statement."

Check and mate.

Remember guys, this is as good as it gets for home sales - this is the "high point of the selling season."

There's no bottom here!

Oil is down a buck today, which is a good sign for the market, but the 10 is modestly higher.

As the market absorbed this news, suddenly the Nasdaq decided to get a bit of indigestion, and barfed up a good chunk of its gains.

Blackstone - the "hot IPO" - has now broken through its offering price and is headed lower. This is not a good sign! Considering that this serves as a proxy for the LBO/PE market in many people's minds, it begs the obvious question - have we seen the top of the PE/LBO market?

We have a very interesting situation developing in the broader markets today. The S&P is under the 50DMA and using it as resistance. The Dow and Nasdaq are using the 50 as support. If I had to take a bet on which way this breaks, it would be lower, as the S&P is simply a larger and more significant chunk of the market. If either the Dow or Nasdaq gets dragged under their 50, the other is almost certain to follow with amazing speed. This would satisfy one of my remaining "Short The Market" indicators.

As things stand right now the DJI has closed just under the 50, but the Nasdaq has managed to hold up. The S&P is below the 50, but has not broken the critical 1490 level.

I am not going to go strongly short the broad market until that happens, as the potential for a whipsaw remains real and the pain you will take being wrong will be extreme if you play this one early and get nailed. I recommend patience; once we break 1490 on the S&P there will be plenty of downside to be taken advantage of. Remember - Bulls get fat, Bears get fat but Pigs get slaughtered.

On the FX side the Yen is suddenly seen as being "not so good" as a weak currency. The interesting part of this is that Japan has sort of "wink-wink-nod-nod"ed at the Carry Trade for a couple of years now, and suddenly, it appears that The Sun Doth Rise, and they have discovered religion on the risk of those trades unwinding in a precipitous - even violent - fashion. As such the jawboning has begun, and it appears, so has the move to correct this problem. This has the potential to bring some interesting moves to the market in the coming days and weeks. This is likely to continue.

As I sit here today watching the tape stream by and the tube blabber on I am struck by something interesting - nobody is talking about the horrifyingly bad ICSC and Redbook numbers! Instead, the story of the day is All IPhone, everywhere, every day.

Talk about whistling past the graveyard!

Isn't Kudlow's - and the rest of the "Goldilocks" folks - scenario that the consumer is healthy and continuing to spend like a drunken sailor, even as his house goes down in value and everything in the credit markets crumbles around him?

Well, how do we square that, exactly, with the ICSC and Redbook numbers? Do those not quite convincingly make the point that indeed the Consumer is tapped out and now spending is falling instead of rising? Isn't this confirmation of the consumer credit report and earnings from last quarter in the consumer credit sector? And if consumer spending is falling, what does that say for the broader economy? Isn't that "R" word in play here again? Hmmmmm....

As the market has gyrated the last few days I've been sorely tempted to take some of these short profits. So far I've resisted. Why? The economic data. I may take 'em going into earnings season, as we may indeed get one more pop out of the markets from historical earnings which, in 2Q, might not be all that awful, if only because the real consumer slowdown didn't hit until Mayish in the stores.

There are also technical reasons to believe we will make one last spasmodic dash higher before it all comes apart. But the overhang keeps getting heavier and heavier, and the cracks wider and wider. Will we follow what "technical analysis" says is supposed to happen - one big final thrust before we fail and go in the ditch - or is it really all over right here - and we are now just waiting for confirmation?

In the end Wall Street is all about looking forward, not back. And if you take the blinders off for a few seconds before you hit the big "BUY BUY BUY" button, your finger might be compelled to stray over to the big red switch located just south of there........

So I remain short for now, but with eternal vigilance and a tight leash, waiting for us to break those key technical support levels - an event that I expect to occur soon.

This, by the way, is the flaw in Technical Analysis. I've heard many times how "technical analysis" predicted the '02 slide, etc etc etc. To be blunt, "oh horsecrap." Technical analysis predicted that eh? It predicted the 9/11 terrorist attacks? Yeah, right. You're not really going to dispute that this wasn't tremendously disruptive to the financial markets and responsible for a big part of the acceleration downward after the '00 tech implosion, are you?

In short my view is that while TA can help you as a trader, ultimately it is news - fundamentals - that drive the markets. And "news" must be tempered with the fact that we seem to have a major problem with "public school education" these days where people read headlines instead of news stories, and even program computers to trade for them based on those headlines!

So frequently, you will see moves that have no basis in the reality of a news item, but on the headline makes perfect sense. When that happens, beware - what you're seeing is at least somewhat likely to reverse violently when the humans take control back and invest more than 30 seconds in one of the oldest scholarly endeavors - reading for content.

BREAKING NEWS: Flyonthewall and a few other rumor sites are reporting that Countrywide Financial's Corporate Offices have been raided in some sort of subprime investigation. This is unconfirmed at present but if true, oh boy...... needless to say the stock took a huge dump as soon as that rumor got out on the street and PUT volume skyrocketed. CNBC also reported that BAC said "nuts" to the idea that they'd have any interest in the firm (there have long been "buyout" rumors flying around in that regard.) Note that attempting to trade this rumor is extremely hazardous; there may be nothing to it just like there was nothing to the so-called "buyout" rumors! You can get violently whipsawed on both long and short sides - be careful!

Late update: Reuters has this to say on the rumor - note the "no comment" response.... You gotta love it when someone's response to a question about an inquiry is "no comment." Is that kinda like "the glove doesn't fit - honest!"

Even later update - apparently there are three ex-VPs of CFC who have agreed to plead guilty to insider trading! Is that it? No idea.

There are also rumblings that the SEC's "look-see" at Bear's Hedge Fund is not stopping with Bear. Apparently they are now broadening that inquiry to cover the bonds of a number of subprime issuers, which has the potential to get very ugly very fast. I do not know at this point which firms are potential targets nor which bonds - again, this is street rumor at this point, not confirmed fact. It would seem to me that the cautious man is the wise man here..... there's little or no chance that this ends well for anyone who touched the toxic waste, and the longer it goes on the longer it looks like we've got radioactivity oozing from every corner of the box. NOTE: CONFIRMED THAT THIS IS NOW A REAL INVESTIGATION.

Late note: The futures got the hell sold out of them right after the close. This is, by the way, typically when margin calls go out. Oh, do you think perhaps someone's phone started ringing? "Heh dude, its your broker calling. He says you're broke!" I wonder what tomorrow is going to look like at the open.....

Ok, more late notes. Bill Gross of Pimco is blowing the whistle on the mess. You have got to read this:

"June 26 (Bloomberg) -- Moody's Investors Service and Standard & Poor's were duped by the make-up and ``six-inch hooker heels'' of collateralized debt obligations they gave investment-grade ratings, and investors now stand to lose all their money, according to Bill Gross, manager of the world's biggest bond fund. "

I love 'ya Bill. I've been saying this for quite a while, and its refreshing to hear someone "in the know" finally blowing the whistle - loudly - on this crap.

Remember, we now have our own forum at http://tickerforum.org/ Yes, it really is a forum for traders, linked here. The hell with the sock puppets and nonsense - let's have some intelligent discussion on trading eh? Suggestions are warmly welcomed as well. See 'ya there!