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Terrible Housing Data Sends Homebuilders ETF Higher?

Sales of new homes in May fell to the lowest level ever, so why did the Homebuilders ETF close higher on Wednesday.

The data could not have been more bearish.

The Commerce Department said on Wednesday single-family home sales tumbled to a 300,000 unit annual rate, the lowest level since the series started in 1963.

What happened?

It was short covering, according to Nishu Sood of Deutsche Bank.

"We're not going to get a headline print much worse than this," he says. "It was definitely lower than anyone I talked to expected. This was short covering."

What's next?

"The housing market is on its own now that the tax credit expired," explains Sood. "The hope is that an improving employment market will drive demand."
But Sood doesn't see it playing out well.

"Typically housing rallies when an economy stops losing jobs and that's already happened," he says.

What's the trade?

The name I like in the space is MDC but it's a land fund more than a homebuilder, says Sood.

In the space, I like Home Depot , says Guy Adami.

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Trader disclosure: On June 23, 2010, the following stocks and commodities mentioned or intended to be mentioned on CNBC’s Fast Money were owned by the Fast Money traders; Adami owns (AGU), (BTU), (NUE), (C), (GS), (INTC), (MSFT); Adami’s wife works at Merck; Kelly owns (BP) puts; Kelly owns (FCX) puts; Kelly owns (GLD); Kelly owns (GDXJ); Kelly is short (GS); Finerman and Finerman’s Firm owns (AAPL); Finerman’s Firm owns (AEO); Finermans’ Firm owns (ANF); Finerman’s Firm owns (BAC) stock and calls; Finerman and Finerman’s Firm own (BAC) preferred; Finerman and Finerman’s Firm owns (BBY); Finerman owns (BP) calls; Finerman and Finerman’s Firm owns (C); Finerman and Finerman’s Firm own (CVS); Finerman owns (GLW); Finerman & Finerman’s Firm owns (GOOG); Finerman & Finerman’s Firm owns (HPQ); Finerman & Finerman’s Firm owns (IBM); Finerman & Finerman’s Firm owns (JPM) stock & calls; Finerman’s firm owns (PM); Finerman’s Firm owns (RIG); Finerman’s Firm owns (TGT); Finerman’s Firm owns (WMT); Finerman’s Firm is short (IJR); Finerman’s Firm is short (IWM); Finerman’s Firm is short (MOY); Finerman’s Firm is short (SPY)

For Brian Kelly
Accounts managed by Kanundrum Capital own (AUY)
Accounts managed by Kanundrum Capital own (GFI)
Accounts managed by Kanundrum Capital is short (AMZN)
Accounts managed by Kanundrum Capital is short (RCL)
Accounts managed by Kanundrum Capital is short (XLY)
Accounts managed by Kanundrum Capital is short (AFL)
Accounts managed by Kanundrum Capital is short (CME)
Accounts managed by Kanundrum Capital is short (EWI)
Accounts managed by Kanundrum Capital is short (EWO)
Accounts managed by Kanundrum Capital is short (GS)
Accounts managed by Kanundrum Capital is short (HIG)
Accounts managed by Kanundrum Capital is short (XLF)
Accounts managed by Kanundrum Capital is short (XLI)
Accounts managed by Kanundrum Capital is short (FCX)
Accounts managed by Kanundrum Capital is short (XLB)
Accounts managed by Kanundrum Capital is short (XLK)
Accounts managed by Kanundrum Capital is short (CLF)
Accounts managed by Kanundrum Capital is short (JOYG)

Peter Boockvar
Boockvar owns Euros

David Rosenberg
***No Disclosures***

Ed Mills
***No Disclosures***

Nishu Sood
***No Disclosures***

Mike Khouw
***No Disclosures***



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