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Looking Overhead at the Homebuilders


While it is obvious by now that the small caps in the Russell 2000 Index are lagging the broad market, also note the homebuilders are underwhelming. Just as with the small caps, we have a high beta former leader showing signs of at least slowing down considerably.

To update the monthly chart of the XHB sector ETF, $30 was that major line in the sand I have been observing to see if bears can finally sink their claws into this group after quarters on end of terrific performance. Overhead supply, or resistance, does not seem to matter much until it does–And then it matters big-time.

Watch $30 on any bounces from here to see if it continues to be a brick wall to an otherwise steep monthly chart angle of ascent. One caveat–a month or two of basing sideways here would be ideal for bulls, as it likely sets up a tight bull flag ripe to explode higher. We should then see just how strong this housing recovery truly is.



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  1. Tpain

    Great post, thanks.

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  2. flyaway18

    ITB seems more heavily weighted to the residential construction companies themselves as well as Lowe’s and Home Depot while XHB seems more weighted toward the retail end of it, goods bought for inside the home, although the homebuilders are in the mix. At any rate, a pullback to buy would be a good thing.

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