I had mentioned in the Weekly Wrap that home prices were falling but was a little surprised to see how hard and how fast. The Standard & Poor’s/Case-Shiller National Home Price Index reported home prices fell at the fastest annual rate on record in the first quarter, but the pace of month-to-month declines continues to slow.
The report showed home prices tumbled by 19% in the first quarter, the most in its 21-year history. To but things in perspective, housing prices have fallen over 32% since peaking in the spring of 2006. Futhermore, we are now at levels not seen since the end of 2002.
This is great news if you are a buyer no doubt. Although there are no visible signs that home prices have hit bottom or that a recovery is about to begin, people are going to start to “look”. The key for a recovery will be the unemployment rate.
The market has shrugged off the news and is soaring higher on the Consumer Confidence report. That report came out at 10am and there were some great trades you could have made based on the news. I say that because as a trader, I was watching for the number to come out, looking for the opportunity to go long or short.
The S&P 500 was flat going into the report along with the Dow and Nasdaq. However, if you had made a list of which calls or puts you wanted to buy as the news was released, you could have made a 50% return in just two hours.
The S&P 500 has jumped 2% but you could have bought a June call option on the S&P that would have netted 50% in just two hours. You could see the dramatic rise in all of the indexes once the news was out and it was an easy trade. Economic reports move markets and if you plan for them, they can offer you quick trades with sweet returns.