New Home Sales

From Wikipedia, the free encyclopedia

New Home Sales is an economic indicator which records sales of newly constructed residences in the United States of America.

Data source
The United States Census Bureau publishes New Home Sales statistics monthly on their website. Statistics are reported as unadjusted monthly rates and seasonally adjusted annual rates.

Economic significance
Because New Home Sales trigger consumption, they have significant market impact upon release. New Home Sales also serve as a good indicator of economic of economic turning points due to its consumer income sensitivity. Generally, when economic conditions slow down, New Home Sales serves as an early indicator of such a depression.

Limitations
Several cautions apply when interpreting New Home Sales statistics:

• New Home Sales statistics exclude any new houses that were not built for immediate sale. For example, in the situation where a purchaser commissions a builder to build a house on a lot that the purchaser already owns, this housing unit would not be included in the statistics. Other construction statistics, such as Permits, Starts and Completions, do include virtually all new residential construction.
• New Home Sales are reported as of the month that a customer signs a sales contract or the builder accepts a deposit. The house can be in any stage of construction.
  
• New Home Sales are not reduced to account for sales contracts which are subsequently cancelled by the customer or the builder. However, in those situations where a cancellation occurs, the house is not re-counted upon a subsequent sale to another customer.

FOREX STRATEGY: MACD (Moving Average Convergen Divergen) 1

From Wikipedia, the free encyclopedia

click to the picture to watch MACD video from "You Tube"

MACD, which stands for Moving Average Convergence / Divergence, is a technical analysis indicator created by Gerald Appel in the 1960s. It shows the difference between a fast and slow exponential moving average (EMA) of closing prices. During the 1980's MACD proved to be a valuable tool for any trader. With the emergence of computerized analysis, it has become highly unreliable in the modern era, and standard MACD based trade execution now produces a greater distribution of losing trades. Some additions have been made to MACD over the years but even with the addition of the MACD histogram, it remains a lagging indicator. It has often been criticized for failing to respond in mild/volatile market conditions. Since the crash of the market in 2000, most strategies no longer recommend using MACD as the primary method of analysis, but instead believe it should be used as a monitoring tool only. It is prone to whipsaw, and if a trader is not careful it is possible that he/she might suffer substantial loss, especially if he/she is on margin or trading options. The standard periods recommended back in the 1960's by Gerald Appel are 12 and 26 days:

MACD = EMA[12] of price- EMA[26] of price

A signal line (or trigger line) is then formed by smoothing this with a further EMA. The standard period for this is 9 days,

Signal = EMA[12] of MACD

The difference between the MACD and the signal line is often calculated and shown not as a line, but a solid block histogram style. This construction was made by Thomas Aspray in 1986. The calculation is simply

histogram = MACD − signal

The example graph above right shows all three of these together. The upper graph is the prices. The lower graph has the MACD line in blue and the signal line in red. The solid white histogram style is the difference between them.
The set of periods for the averages, often written as say 12,26,9, can be varied. Appel and others have experimented with various combinations.

Interpretation

MACD is a trend following indicator, and is designed to identify trend changes. It's generally not recommended for use in ranging market conditions. Three types of trading signals are generated,

• MACD line crossing the signal line.


• MACD line crossing zero


• Divergence between price and MACD levels