Sunday, October 25, 2009

Housing Index Diverges From The S&P



In my previous post I pointed out that some of the banks were beginning to show signs of weakness, well we're also seeing that take place in the housing index. Above is a daily chart of the homebuilding index (HGX) and in the lower pane is the S&P500. You'll notice since July both markets correlated perfectly making highs and lows together up until mid September where we are seeing an interesting change take place.

In mid September both the S&P and the homebuilding index made a high and sold off into early October where both markets began to rally. The S&P last week made a new swing high but the homebuilding index did not. This is called a bearish divergence and in my opinion could spell trouble for the homebuilders and the stock market if this weakness persists.

Does this mean that the S&P bull market is over? Is it time to short? Only the market knows but one thing I am alerted to is that the spine of the bull is beginning to weaken.

2 comments:

Anonymous said...

Good observation. The transports are looking ugly as well.
-DaveT

Anonymous said...

Have you considered the fact that this might work another way? I am wondering if anyone else has come across something
similar in the past? Let me know your thoughts...

Money-Making Ideas

DISCLAIMER

This site may include market analysis. All ideas, opinions, and/or forecasts, expressed or implied herein, are for informational purposes only and should not be construed as a recommendation to invest, trade, and/or speculate in the markets. Trading and investing involves high levels of risk. Any investments, trades, and/or speculations made in light of the ideas, opinions, and/or forecasts, expressed or implied herein, are committed at your own risk, financial or otherwise.
 
Google
Technorati Profile Finance Blogs - Blog Top Sites