Trader’s Narrative

Although this is a bit painful, (how the heck was I sooo wrong?) in the interest of accountability, here is a review of a call on housing and home-builders stocks from last summer.

Beazer (BZH) which I featured sitting right at support at $27.50, sliced through it without any hesitation. This is what stop losses were made for! Obviously not every trade will make you money. If you value discipline over conviction, you’ll live to play another day.

Since I mentioned the National Association of Home Builders (NAHB) Housing Market Index, I thought I’d take a look at a long term chart of this indicator and put it into an interactive chart for you (see below).

If you aren’t familiar with this metric, every month the NAHB surveys over 300 individual home building companies in the US to maintain the Housing Market Index. The index reflects the demand that builders see for housing.

The 3 components are the present demand for single family detached, future (6 months) projected demand for single family detached and the level of traffic of prospective buyers. Not surprisingly, this index along with almost every other index, has reached never before seen levels:

The chart is interactive so mouse over, zoom into shorter time frames by moving the triangles on the horizontal axis, and explore for more. The line in the sand is 50 - any level above that is interpreted as home builders viewing their market as “good”. We are far, far from that.

I’m curious if there is any relationship between this and say the Fed Funds rate or unemployment or the bond market yields. Any other ideas on what to compare this to in order to get a handle on what may be a leading indicator for it?