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Let’s Get Ready to Rumble!

Happy Monday.

This week will bring a few potentially market-shaking events—though their long-term impact is unlikely to ruin anyone’s financial life.

But as we already saw market swings pick up last week in anticipation of this week, it will pay to gird your psyches for what’s coming.

First, tomorrow (Tuesday) morning we’ll get the housing starts report for August. In July, this metric soared to a post-recession high, but the consensus estimate is for a pullback in August. But if housing starts are again much stronger than expected, watch for the market to react like the sprinters in the Monty Python classic sketch – freaking out in all directions. That’s because real estate bulls will push home-building stocks higher, along with associated sub-sectors such construction materials and home improvement. (A couple holdings in analyst Linda McDonough’s Profit Catalyst letter likely will get major boosts.) But inflation hawks will see a strong housing market as a final data point for the Fed to use to justify a rate hike. Could be fun!

Wednesday is the Day We’ve All Been Waiting For (since mid-June, at least): the Fed will announce whether or not the Federal Open Market Committee will recommend to raise short-term interest rates.  If the Fed hikes rates, we could see short-term declines in U.S. stocks and bonds; if they don’t, the reaction is harder to predict but also could be negative, as many think a hike is overdue.  Either way, keep an eye out for bargains from Investing Daily analysts. Short-term tantrums are fantastic opportunities for calm, long-term investors. Don’t miss this one.

On Thursday, existing home sales for August will be reported. In July, this key measure of real estate market demand dropped 3.2%. Analysts are looking for a slight uptick in August, in part due to expectations of rising mortgage rates this fall. Existing home sales are considered a solid leading indicator of the economy’s strength, though more so when coming out of a recession than the other way around. Still, another disappointing month would provide fodder to those who think the economy is slowing – and if that happens after the Fed boosts rates, look for the market to sink.

As if all that weren’t enough, a bunch of companies are reporting earnings this week. Look closely for trade alerts and breaking news from our analysts.

Last but not least: today is the last day to take advantage of the temporary window to subscribe to the brilliant Jim Fink’s Velocity Trader. Only 100 slots are available, and they’re almost all taken — and after today, the window will close. Jim’s trades over the past year have been remarkably profitable, and you really owe it to yourself to read about this service to see if it makes sense for you. Click here for more information.


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