HOME BUILDING RELATED ETFS CHALLENGE NOVEMBER HIGHS... The Home Construction iShares (ITB) and the Homebuilders SPDR (XHB) have quickly gone from laggards to leaders. Chart 3 shows XHB pulling back sharply in November, but finding support near the October low and surging the last five days. This surge reinforces support in the 15.3 area. Perhaps more importantly, this move indicates that an uptrend since late August remains in progress. The indicator window shows the price relative, which is the XHB:SPY ratio. This ratio measures relative strength or weakness. XHB is relatively weak when the ratio falls and relatively strong when the ratio rises. The ratio dipped to a new low in late November, but turned up the last two weeks with a rather abrupt about face.
Chart 4 shows ITB actually breaking support from the October low, but recovering and moving back above 12 with a sharp surge the last five days. This looks like a good old fashion bear trap. The ETF broke support and the price relative (ITB:SPY) ratio hit a new low in November. These bearish developments have been negated with the move above 12.
HOME DEPOT, LOWE’S, LENNAR AND KB HOME LEAD THE CHARGE... Looking through the industry group, we can see big moves in two builders and in two building related retailers. Chart 5 shows Home Depot (HD) holding support around 30 and surging above consolidation resistance with good volume the last four days. Chart 6 shows Lowe’s (LOW) also breaking out with a big move on big volume last week. These broken resistance zones now turn into support zones.
(click to view a live version of this chart)Chart 5
(click to view a live version of this chart)Chart 6
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