The effect of supply logjams
Today Existing Home Sales numbers and Wednesday's New Home Sales will be in the focus for market participants and investors. Construction sectors and industry is one of the most industries in the economy with the possibility of creating many job opportunities, higher usage of raw materials, and durable goods.
Just to review the previous month's data, Existing home sales increased 7% in September to a 6.29 million-unit annual pace, and new home sales jumped 14% to an 800K-unit pace, which was the strongest increase since March.
Earlier in summer, we had some weaknesses in the US housing market, which were mostly seen because of supply chain challenges, and not the fewer interests of buyers. For October data, the existing home sales that will publish later today are expected to slow down a bit to a 6.20 million-unit annual pace, while new home sales, which we will have its data later this week on Wednesday, are expected to decline 0.7% to a 794K-unit pace. This weakness also can be following the supply logjams and labor market shortage. Also, recently mortgage rates increased, which means that higher home prices can weigh on sales.
With positive sentiment in the market, Monday started with an increasing futures market, while thanksgiving holidays and FED meeting minutes are ahead. With expected data and numbers in the Housing sector also, we are expecting to see a bit of weakness in the stock markets in the coming days, as we are waiting for a bit of weakness in the housing numbers, so do economy in the short term. It can be a bit against the overall expectations that traditionally thanksgiving holiday with shopping period, has tended to correlate with gains for the US equity markets.
From the technical point of view also, DJI has a very important pivot at 35,800, and trading under this level will put the asset under pressure to see the lower levels. RSI at 37 and the falling OBV trend line also support the bears. The current level at 35,675 is the 200 MA line in the H4 chart, and closing under this level will support the bears more strongly for the rest of the week.