Equity Analysis: Lowe's on a summer decline?

Lowe's (LOW) broke cleanly below the 200 day moving average on 6-1-11 which was at $24.16, building on its bearish momentum. The home improvement giant has felt the heat of the housing slump and will continue to feel it into the summer. The company recently reported lower than expected earnings for the first quarter of 2011. In particular net sales decreased 1.6%, however management is forecasting a 4% increase in sales over the next quarter. Strangely, management blamed the lower sales on high gasoline prices, which they say deterred customers from making the trip in. Fittingly, management also cited the economic slump as a contributor for homeowners putting off renovations and more expensive home purchases. Following are observations on this stock's technicals and fundamentals. The housing recession is here to stay, at least for the duration of the summer. Case-Shiller confirmed Tuesday that there is a housing double-dip. “Prices continue on their downward spiral with no relief in sight,” says David M. Blitzer, chairman of the Index Committee at S&P Indices. Furthermore, the buying pick-ups seen in 2009 and 2010 can mostly be accredited to the first-time home buyer tax credits not an actual sustainable demand pick-up. This does not bode well for Lowe's, as new homes are typically accompanied with painting and other surface renovations at the very least. The housing market problems will continue as long as employment remains stagnant to negative, among other economic factors. With QE2′s planned ending in June, theoretically the dollar should.... Continue reading here. Watch today's "DM In The AM" and "Tynik's Two Sense" on Hedge Fund Live here.