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Two Ways: Home Prices Hammer S&P


Strengthen your portfolio in good times and bad.


Goldman Sachs' top strategist says the S&P 500 could plunge to 650 before bouncing back because home prices still have further to fall.

In a note to clients, David Kostin wrote that his group remains defensive for the time being. "Improvement in credit-related losses in financials (which are linked to home prices) and clarity surrounding fiscal policy are critical for the S&P 500 to begin a sustained rally," he explained.

According to Bloomberg, Kostin cut his earnings estimate for the S&P 500 to $40 per share, down from $50 per share. This makes his new target for the index 940, down from his previous estimate of 1100. It also makes him the second-most bearish of 10 strategists tracked by Bloomberg News.

From the Bull Pen: It's tough to be long in this market, but bulls can still consider the agriculture plays which performed well in today's session. Monsanto (MON) with a sell stop near $72 could be a decent risk/reward opportunity.

From the Bear Cave: Is it too late to play the downside in Meritage Homes (MTH)? Bears can consider an initial position here on the theory it will eventually break $10 support again. Remember to set your stops.

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No positions in stocks mentioned.

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