Thursday, June 17, 2010

Housing Stocks - Update

Yesterday I wrote about how the housing stocks were showing relative weakness compared to the overall  market. Well the weakest group of stocks today were the housing stocks (HGX) closing down almost 2% while the S&P was up slightly on the day.

Notice the 12 day cycle of highs that is beginning to appear since last month's high was made. Every 12 days these stocks get hit with selling and continue to sell off for another 6 days or so. I know at some point this pattern will fall apart but while it does exist I will take advantage of it.

The ratio line in the lower panel is making new lows which confirms how weak these stocks really are compared to the S&P500.

Some of the weak homebuilders today were:  HOV down 5.47%, SPF down 4.41% and TOL down 3.99%.

One important thing I would like to add is that a move above this week's high in the HGX index will negate the bearish outlook.

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