New Home Sales Fall

Market Action:
On Monday morning the market heard some believable news on new home sales, that they were down, a lot.  This news met with some sudden selling.  We’re not sure why the response was to sell; after all, the market seems to have liked the possibility of the Fed lowering rates.  (yes, some sarcasm)  

The housing news was pretty negative even though the headline number was that the new home sales were down 3.9% to an annual pace of 848K.  They did report that this number was down 18.3% below a year ago levels and followed a 16% decline in January.  Let’s get back to the headline number.  

We said (for the third post now) that the expectation was for 995K annualized new home sales.  How do they calculate a 3.9% decline last month?  Last month’s figure had been reported as 937K but this month that number was revised down to 882K, a miss of about 55K.  From there the new number came in at 848K which is down 3.9% from the 882K.  Follow?  This is the new math from the government.  They’re here to help us.  Our math shows us that the economists’ estimates were off by about 15%, yicks.

At any rate, the Dow went down about a hundred points before finding a bottom and then ground higher all day long with a pretty good spurt in the final hour.  The Dow couldn’t manage to close up on the day but the other major indexes did.  

Opinion/Analysis:
Our assessment is that the market decided it couldn’t be going down just quite yet.  We normally watch Monday’s for some strength and we definitely watch for news related declines that don’t have any follow through.  So, today was one of those days that didn’t really help the bearish case.  

We now have a few days for a market reconciliation before we decide what to do.   The end of the month tends to be fairly strong and this being the end of the quarter, we want to be ultra-cautious with our money.  That’s not to say the market can’t go down from here, it certainly can.  We just don’t want to be in the way of any upside that may occur.  Plus, any more upside would give us an even better position to buy some puts.

Our Moves:
The way the market traded right after the new home sales came out was uncomfortable enough to make us want to exit our options so we sold them at about a 20% profit.  We remind you that these trades are for small dollars relative to our portfolio and the trading is mostly for fun and profit.  Options can be dangerous as they tend to move more than you like sometimes.  We were satisfied with our trade but we are still waiting for a good signal from the market that a big down wave has started.

Dow Industrials:  12,469.07  -11.94
VIX: 13.16
HUI:  345.93
QQQQ:  44.30
QQQRR: 1.13 bid
QQQRT:  2.13 bid
RYVNX:   16.56
RYAIX:  21.28
RYCWX:  35.79
TLT:  88.90
BEGBX:  13.89