With positive news regarding U.S. residential construction numbers, stock-index futures reacted bullishly today. The Existing Home Sales report created quite a bullish move of about 5 points on the ES (E-Mini S&P). This large move occurred near the 10:00 a.m. mark when the report was announced.
See the chart below.
According to U.S. Commerce Department figures, new housing construction rose in August by 2.3 percent. As of the last two years, single-family home construction starts are at the highest point right now. This increase is likely due to mortgage rates near all-time lows and inexpensive property costs. The National Association of Home Builders/Wells Fargo rates home builder confidence at the highest level in more than six years (since June, 2006). The average rate for a 30-year fixed mortgage held at 3.55 percent last week. This nears the lowest ever recorded 3.49 rate that occurred on July 26 of this year. In addition to low interest rates, experts believe pent-up demand and attractively priced homes are driving the housing recovery.
Fed Chairman Bernanke regards the housing industry as “one of the missing pistons in the engine.”
John Paul, founder of Day Trade to Win, adds his insight…
“News of an improving housing market is in line with my expectations of 2012 ending on a bullish note, that is, closing higher than the price at which the year opened. If you go back to my posts in January of this year, you’ll see my prediction. In summary, the rule of the January Effect says the bullish or bearish movement of month of January dictates (with decent accuracy) that the remaining year will close in the same bullish or bearish direction. In the coming months, it will be interesting to see where the election takes the markets and how long they will be influenced.”