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New home sales set record

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This morning's economic data showed that more Americans bought new homes in November that stretched sales to yet another record as new home sales reached 1.07 million, up 5.7% from October's 1.01 million sales rate. November's 1.07 million rate was above consensus estimates for a 1 million unit rate.

Sales for new homes was strongest in the Midwest, with 257,000 new homes finding buyers in November. Sales soared nearly 41% according to the government's report. In the south, sales were up a more modest 2.4%, while sales plummeted 26% in the Northeast and fell 3.9% in the West.

The declines in the Northeast put the level of new homes sold at the lowest point since September 1995.

While today's housing numbers were above estimates on a national basis, some feel that the housing bubble that some have been looking for may be starting to deflate in the Northeast part of the country as Wall Street firms continue to cut workers, which may be partially attributed to the fall off in housing sales in that part of the country.

Stock did find a quick bid on the overall number, but turned to their lows of the session.

The Dow Industrials (INDU) 8,375 -0.67% currently trades off 57 points with 26 of the 30 Dow components trading lower. One stock we've wanted traders to be monitoring as a "key stock" in both the Dow Industrials, S&P 500 (SPX.X) 882 -0.84% and S&P 100 Index (OEX.X) 446 -0.88% was International Business Machines (NYSE:IBM) $77.20 -1.65%, which was a stock we discussed in last weekend's "Ask the Analyst" column. Today's trade at $78 has IBM back on a sell signal and will have the bullish % for all three of the above mentioned indexes seeing at least one stock generate a sell signal today. However, as discussed is recent sessions, today's trade at $78 is further sign that supply is beginning to further outstrip demand for stocks, even the stronger ones like IBM.

We will now be monitoring the S&P 100 index (OEX.X) 446 -0.88% for another negative sell signal should that index trade 445. As discussed again in last night's Index Trader Wrap, a trade at 445 would have this index generating a "spread-triple bottom" sell signal on its $2.5 box scale p/f chart. While the conventional $5 box would see a double-bottom sell signal take place with a trade at $445.

Current action from IBM and developing action in the Indexes has been alerted to by the bullish % charts and looks defensive.

Renewed buying in Treasuries and a failed "reverse head and shoulder" pattern in the benchmark 10-year YIELD ($TNX.X) just this morning also has the look of a defensive posture beginning to further itself in the markets.

Jeff Bailey

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