Pending Home Sales Fall

- Pending Home Sales for February fell 1.9% versus estimates of a 1.0% decline and an upwardly revised .3% gain in January.

BOTTOM LINE: The number of Americans signing contracts to buy previously owned homes declined more than forecast in February, Bloomberg reported. Pending resales fell 9.8% decline in the West, 5.5% in the South and 3.7% in the Midwest. Pending sales increased 3.2% in the Northeast. According to Bankrate.com, the average 30-year fixed rate mortgage is currently 5.68%, down from 6.12% last month and down from 6.42% in June of last year. The Homebuyer Affordability Index is at the best level in five years. The US dollar index is .16% higher and the 10-year yield is unch. on the report. Fed fund futures now imply a 62.0% chance for a 25 basis point rate cut at the upcoming April 30^th meeting and a 38.0% chance for a 50 basis point cut. I think a 50 basis point cut is highly unlikely at this point. I continue to expect home sales to trend above expectations over the coming months on pent-up demand, lower prices, lower interest rates and less fear.

Bull Radar

Style Outperformer:

Mid-cap Growth (+.38%)

Sector Outperformers:

HMOs (+2.26%), Steel (+1.19%) and Hospitals (+.83%)

Stocks Rising on Unusual Volume:

ACI, FCL, MCF, NOV, TIN, TSL, ESLR, BK, NTRI, LAYN, CHTT, VRSN, PSUN, VNUS, NUAN, CERN, CTXS, FCSX, ATAC, SONO, SQM and ACN

Stocks With Unusual Call Option Activity:

1) CTXS 2) UNM 3) NSM 4) NTRI 5) MLM

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Tuesday Watch

Late-Night Headlines
Bloomberg:
- Sumco Corp., the world’s second-largest maker of silicon wafers, expects sales of the material used to maker of silicon wafers, expects sales of the material used to make solar power cells to gain 11-fold in the next seven years as customers including Sharp Corp. boost production.
- Former Fed Chairman Alan Greenspan said the drop in US home prices will probably end “well before” early next year as the number of houses on the market diminishes, aiding an economic rebound. “It’s difficult to imagine any major breakout of inflation as economic slack continues to increase,” he said.

Wall Street Journal:
- Olympic-Torch Protests Ignite Chinese Indignation. Ordinary Citizens Chafe at Treatment; Chaotic Paris Relay.

CNBC.com:
- Apple(AAPL) Earnings ‘Kernals’ Start to Pop.
- Investors Hope for an Alzheimer’s Miracle.
- China Ca$h May Flood US Markets. Forget about sovereign wealth funds. Thanks to a new Sino-American agreement, a bigger influx of cash could be on its way to US markets – from Chinese institutional investors.

NY Times:
- There’s Gas in Those Hills. A natural gas drilling frenzy unlike any seen in decades is unfolding in rural Pennsylvania, and it eventually could encompass a huge chunk of the East.
- CBS has been in discussions with Time Warner about a deal to outsource some of its newsgathering to CNN.

IBD:
- Costco’s(COST) customers still shopping.

Forbes.com:
- Get Shorty. With short-selling volumes hitting record highs at the major exchanges and with volatile financial markets, many are wondering whether a flurry of manipulation cases will be coming out of the SEC in the near future. Some want any investigation to be broad. The Financial Industry Regulatory Authority, which oversees broker-dealers along with the stock exchanges, sent a warning to member companies last week. “Intentionally spreading false rumors or engaging in collusive activity to impact the financial condition of an issuer will not be tolerated and will be vigorously and aggressively investigated,” it said. Part of the problem is that brokerages and their stock loan desks aid in naked short short-selling by looking the other way or by purposefully misrepresenting the availability of stock to borrow, reaping fees for services they haven’t actually provided.

Energy Intelligence Group:
- Iraq has shipped out the last remnants of its nuclear program, 1.5 million pounds of U308, Uranium Intelligence Weekly reported. The uranium has been bought by Saskatoon, Canada-based Cameco Corp.

Reuters:
- Hedge fund managers will have to become more creative to hold onto billions of dollars now that their investors are fretting about lackluster returns and want their money back, a top industry executive said on Monday.
- Record-high gasoline prices will reduce US demand for motor fuels this summer compared to last year, the first drop in summer gasoline consumption in 17 years, the government’s top energy forecaster said. Caruso said OPEC needs to pump more oil to help lower crude prices that are above $100 a barrel.
- Car makers try to copy green halo of Prius.
- Levi Strauss & Co. is launching an updated line of its 501 jeans with higher prices to match.

Financial Times:
- Experts start to see light in credit gloom. Is the worst over? For the first time since financial turmoil began in August last year, some respected experts are beginning to speculate that the worst of the credit crisis may now be past.
- Sovereign wealth funds and other overseas investors will face closer scrutiny by US regulators under changes to the way foreign deals are vetted on national security grounds.
- The board of the IMF voted on Monday to cut 15% of its staff and sell about $11 billion in gold reserves. The IMF plans to cut 380 jobs and sell 403.3 tons of gold, about an eighth of its reserves.

TimesOnline:
- Raise offer and we will talk, Yahoo!(YHOO) tells Microsoft(MSFT).

Late Buy/Sell Recommendations
Citigroup:.
- Reiterated Buy on (SWX), target $37.

Night Trading
Asian Indices are -1.0% to +.50% on average.
S&P 500 futures -.34%.
NASDAQ 100 futures -.31%.

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Earnings of Note
Company/EPS Estimate
- (LAYN)/.39
- (MSM)/.69
- (ZZ)/.11
- (MIND)/.27
- (CHTT)/.95

Upcoming Splits
- None of note

Economic Releases
10:00 am EST
- Pending Home Sales for February are estimated to fall 1.0% versus unch. in January.

2:00 pm EST
- Minutes of March 18 FOMC Meeting.

Other Potential Market Movers
- The weekly retail sales reports, IDB/TIPP Economic Optimism Index, (AWI) analyst meeting, Howard Weil Energy Conference and CSFB Global Real Estate Conference could also impact trading today.

BOTTOM LINE: Asian indices are mostly lower, weighed down by automaker and technology stocks in the region. I expect US equities to open modestly lower and to maintain losses into the afternoon. The Portfolio is 75% net long heading into the day.

Stocks Finish Mixed as Gains in Financials, Telecom, Airlines Offset Losses in Alternative Energy, Retail, Gaming Shares

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In Play

Stocks Mostly Lower into Final Hour on Surge in Energy Prices, Profit-taking

BOTTOM LINE: The Portfolio is higher into the final hour on gains in my Medical longs, Internet longs and Computer longs. I added (IWM)/(QQQQ) hedges and added to my (EEM) short today, thus leaving the Portfolio 75% net long. The overall tone of the market is neutral as the advance/decline line is slightly lower, sector performance is mixed and volume is below average. Investor anxiety is slightly above average. Today’s overall market action is neutral. The VIX is falling .7%, but remains above average at 22.3. The ISE Sentiment Index is a below average 117.0 and the total put/call is slightly above average at .95. Finally, the NYSE Arms has been running below average most of the day and is currently .82. The financial ETF(XLF) has a -.93 correlation with the oil ETF(USO). It isn’t surprising to see financials give up much of their morning gains with oil trading back near a record high. I am seeing a number of technical signs that oil could be making a double-top. It is also interesting to note the weakness today in agricultural commodities, despite the rise in energy. The S&P Goldman Ag Spot commodities index is down 1.73% to session lows. Commercials continue building their record short position in gold, while large speculators continue to build their record long position in the metal. I did a link update over the weekend. Please check out the new links on the right-hand side of the page when you get a chance. Nikkei futures indicate an +55 open in Japan and DAX futures indicate an +51 open in Germany on Monday. I expect US stocks to trade mixed-to-lower into the close from current levels on higher energy prices and profit-taking.