Wednesday, June 16, 2010

Watch The Housing Index

Even though I've been bullish on the stock market and it has been moving higher as forecasted, it is important to look at the other side on the coin for any weakness that may be lurking within the current rally.

Above is a chart of the Housing index (HGX) and in the lower panel is the Homebuilders vs. the S&P500.  As you can see the homebuilders have not rallied that much over the past 7 trading days. In fact, the HGX index is making a lower high compared to the S&P 500.

The ratio line in the lower panel is also at the lows which is an indication as to how weak these stocks really are. The HGX index put in an inside day today which means watch for a downside break tomorrow as the 12 days cycle high is due around now. If the homebuilders do sell off, they might pull the S&P down for a few days giving the bulls an opportunity to add to their long position. Let's see what happens!


Anonymous said...

If the housing index is breaking down, that is not something for "a few days". It is not a buying opportunity. That is garbage advice. Stock markets rose on the basis of a recovery. No housing recovery equal no economic recovery. At least be truthful and explain both sides in your analysis instead of spewing garbage like CNBS all the other financial media that spins all the bad data coming out to somehow make it bullish for the market.

frank said...

Kevin for those not long yet, at what S and P number would start going long on a pull-back.

many thanks

Anonymous said...

Thanks for sharing your thoughts Kevin, you are great.

One question, I know you are bullish in the near term, but how long do you think the rally will last/what degree? It seems to be you are still bearish on the long term basis.




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