Today at 8:30am, Housing Starts and Building Permits will come out and let investors know how the overall economy is doing. The numbers help investors gauge the housing market's behavior fluctuates on a monthly basis. Building permits measure the amount of new building permits have been issued by the government. Housing starts measure the rate of new residential construction in one month intervals.
Positive numbers essentially mean that new buildings, for corporate or residential purposes, are being approved and built. If the numbers beat estimates, that would be a positive indicator for the housing market. The housing market is important for the overall economy because investment in property and equipment are significant for the majority of companies and individuals. This would signify increased economic confidence.
This morning, traders will be for building permits and housing starts to be higher than estimates of 630K. If the number is higher than the estimate, equity market futures will immediately move higher, and barring unforeseen European news or other macroeconomic news, will set the stage for the US equity markets.
Long-term investors should also keep in mind the numbers from the prior period. Both numbers come in every month, so long-term investors should keep track monthly snapshots of the job market. Any aberrations or sudden drops could mean that consumers are wary about the housing market and the economy in general.
Investors should also keep in mind that the holiday season may artificially alter claims. There is the chance that housing numbers will be artificially lower, since many citizens tend to be grounded during the cold winter. Housing purchases are also less likely to occur during the holiday season because many Americans place added value on gifts for friends and family. The spirit of giving also tends to tighten pockets, so many Americans not be looking for new property as well.
Consumers have a few options when it comes to understanding the US economy. The housing numbers indicators that could help investors gauge where the economy is heading into the future. Investors should also keep up with the news via Benzinga Pro to stay on top of major developments that move markets.
Bullish View:
Traders who believe that housing numbers will be positive might want to consider the following trades:
- Long US Equity futures by purchasing shares or call options. If you go with the options strategy, you could purchase a straddle just to reduce risk associated with the bet.
- Long the US Dollar Index, which typically reacts well to positive housing numbers. You could also short it against another currency like the Euro.
- Purchase option straddles of an ETF that tracks US equities like the S&P 500 SPDR SPY.
Traders who believe that housing numbers will not be positive may consider the following positions:
- Short US equity futures. The futures market typically relies on technical analysis for entry and exit points, so identifying the next support level may be useful.
- Short the dollar index if both numbers are negative. If one is positive and one is negative, the dollar may trade flatly. It comes down to the extent of negativity, however. Housing starts is more important, and its number will set the stage.
- Short the Euro, which could go down as investors fear that Europe will be worse-off than the United States. Bad US housing data could indicate to Europeans that their own housing situation may not be positive in the coming months.
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