TOLL Takes a Toll

This morning caught the Toll Brothers with their pants down, no just their earnings guidance was down.  The report in the Wall Street Journal on Wednesday will report that orders rose 1% in their fiscal fourth quarter ending October 31.  A UBS analyst said she expected 22%.  Orders fell 10% in the Mid-Atlantic, 5% in the Midwest, and 50% in the West.  Toll Brothers dropped 14% today on that news taking the HGX, Philadelphia Housing Sector ETF, down 5% with it.

I think we are seeing more and more evidence that the housing juggernaut is slowing receding.  If you were to look at a chart of the HGX you would see a large rise since the beginning of 2003, shortly after it started.  The price started near 200 and topped out in the first week of August this year just over 585.  So, the Bond market topped out in June, the HGX topped out in August, the hurricanes were in September and here we sit in the midst of a stock market rally.

Now, Toll Brothers, TOL, said that consumer confidence has dropped resulting in people taking more time to make decisions on purchases.  They also cited the recent spike in gas prices after the hurricanes.  I’m a little confused by this since they service the luxury market supposedly.  Why would the luxury market worry about the price of gas???

Anyway, TOL traded at a record high of 58.67 in late July and closed today at 33.91.  The housing sector has been the big stock market leader for the past three years and now it has lost its leadership quality.  This is not a good thing for the economy or for predicting a bullish trend going very far into the future, when the leaders fall, the rest run away.  

Today’s market was again dull trading very little volume and trading down just a bit.  We stick to our bearish stance and advise that you be very careful.  The market has given you some confidence for a bright Santa Clause rally.  You should be careful that you don’t get a lump of coal in your portfolio.

Dow Industrials:  10,539.72  -46.51  (still in the 10,500’s)
RYVNX:  20.01
TLT:  89.28