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Macro Monday 3 - SPDR Homebuilders XHBMacro Monday SPDR Home builders ETF (XHB) This equal weighted index tracks 35 holdings of the homebuilders segment of the S&P Total Market Index (TMI) and is spread across large, mid and small cap stocks. These comprise of the Homebuilding sub-industry, and may include exposure to the Building Products, Home Furnishings, Home Improvement Retail, Home furnishing Retail, and Household Appliances sub-industries. The Chart - AMEX:XHB The Chart can be used as a leading indicator for the US housing market as the stocks in the XHB comprise of companies that provide the materials and products to build new houses and renovate homes. These products are higher up the supply chain and sold before construction commences or during. In the past the XHB chart provided a significant advance warning of the 2007 Great Financial Crisis which is illustrated in red on the chart. A similar negative divergence would be worth watching out for in the future. At present the performance of XHB is ahead of the S&P500. XHB is 5% from ATH’s at $87.00. This is in keeping with how this chart leads the market as it includes products and materials required for new builds and renovations. I would expect some resistance at the ATH which could act as a decision point for price. A break above the ATH with support established on it would be positive for price. A rejection off the ATH or a false break out and we would need to monitor price closely to see can price find support on the 10 Month SMA. If a lower high occurs on XHB (like in 2007), this could be an early warning signal of downward price pressure to follow on the S&P500. As noted on the chart the average performance post MACD cross is a price increase of 80%; - We are currently at $83.50 which is a price increase of 21% from the recent MACD cross. - A revisit of the ATH at $87.00 would be a price increase of 26% from the recent MACD cross. - An 80% average increase would lead us to the top of the parallel channel (see chart). - None of the above percentages are guarantees, we are just looking at probabilities. Factoring in that we are above the 10 month moving average and that it is sloping upwards, I remain positive about the continued performance of XHB, although I would not be surprised to see resistance at the ATH of $87.00 and a pull back to the 10 month SMA would be standard. If a weekly candle closed below the 10 month SMA, this is where I would start to get concerned and would then start to lean bearish. If we got follow through lower after that point, this would be alarm bells for me. We can draw a correlation here to the first Macro Monday chart I shared on July 3rd, the Dow Jones Transportation Average Index DJ:DJT which also established a lower high as the S&P500 CBOE:SPX continued its ascent. Both the XHB and the DJT demonstrated they can be leading economic indicators by establishing lower highs prior to the 2007 Great Financial Crisis. PUKA
Editors' picks
AMEX:XHB
by PukaCharts
22
New Floors with Lumber Liquidators LL commodities retail rally“Inequality can be done away with only by establishing a new society, where men and women will enjoy equal rights, resulting from an upheaval in the means of production and in all social relations. Thus, the status of women will improve only with the elimination of the system that exploits them.” Lumber Liquidators looks good for a reversal. Small share float, strong sales, strong P/B P/E P/C and near zero debt vs equity. Risks: Value Trap, Discretionary spending retraction, macro momentum stays negative
LLong
by noam_chom
5
SPDR Homebuilders ETF (XHB) at risk of bearish reversalAMEX:XHB US housing market, a key contributor to US economic growth via the wealth effect that will trickle down to consumer spending & confidence. We can decipher its impact on the overall stock mkt via sentiment/technical analysis on2/2 The recent rally of the $XHB from 19 Oct 22 low to 22 Nov 22 has been accompanied by declining volume & underperformance against the SP 500 ETF $SPY Looks like up move has hit an inflection zone for a potential bearish reversal below 64.40 key MT pivotal resistance. $XHB 2/2 The recent rally of the $XHB from 19 Oct 22 low to 22 Nov 22 has been accompanied by declining volume & underperformance against the SP 500 ETF $SPY Looks like up move has hit an inflection zone for a potential bearish reversal below 64.40 key MT pivotal resistance.
AMEX:XHBShort
by Kelvin-Wong
XHB ! US housing market Burst- Upcoming Recession-BTC 100K+I'm looking at XHB weekly timeframe and comparing 2006-2009 US housing market with current situation. On 17 July 2006 XHB bounced 38% then dumped and lost previous swing low/ key support /28-30$ level/ on 23 July 2007/371 days/. When XHB lost key support SPX made first top and second top was 3 months later with bearish divergence, after which S&P dumped 57% and stayed in a bear market 511-595 days. After the bursting of the U.S. housing bubble US great recession started from December 2007 to June 2009. XHB dumped 73% and bottomed at 8$ in 2009. I think the current situation is the same and the same scenario will play out if XHB loses previous swing low and key support/50-52$/. It has already dumped and lost key trendline 60-61$ then pumped 32%. I putted alarm at 50-52$ zone and waiting for break down in coming months, I history repeats the same way, XHB will break down in Q2-2023 /approximately in April-June 2023/ and 140 days later a big recession starts. I think at the same time SPX and BTC will top as well. But before that my best case and most bullish scenario for BTC is new ATH and even 120-145K top target. I'm sure BTC has already topped at 17.5K on 18.06.2022 based on my analysis. You can check them looking at bellow attached files. Later I will post my other scenarios for BTC.
AMEX:XHBLong
by ergal91
EverGrande Real-estate situation in China = Black Swan Event?Will the EverGrande Real-estate situation in China be the catalyst that pops our real estate bubble and slow down our homebuilder industry? This was last year, when they listed their stock to the HK market and scammed retail money. Now they are out of cash again, and their bonds are worth less than 30% on the dollar. If this thing collapse, it could be China's version of the Lehman Collapse. " The world’s most indebted developer has warned Chinese officials it faces a potential default that could roil the nation’s $50 trillion financial system unless regulators approve the company’s long-delayed stock exchange listing. Shares and bonds fell in volatile trading. China Evergrande Group mapped out the scenario in an Aug. 24 letter to the Guangdong government seen by Bloomberg, in which the company sought support for a restructuring proposal needed to secure the listing and avert a cash crunch. Some of Evergrande’s biggest strategic investors have the right to demand their money back if the company fails to win approval for a backdoor listing on the Shenzhen stock exchange by Jan. 31. If investors refuse to extend the deadline, Evergrande will need to repay as much as 130 billion yuan ($19 billion), equivalent to 92% of its cash and cash equivalents."
AMEX:XHB
by WallSt007
Normalization Places Fresh Pressures on the Spring Selling Seaso{repost from my blog which includes screenshots and charts} Housing Market Intro and Summary The Spring selling season looked like it started strong for new home sales. The data for April reveal a story evolving differently. Absolute inventories rose for both existing and new homes and yet sales declined. Housing starts also suffered a setback. Median prices of homes soared, especially for new homes, as sales skewed more toward the higher end of markets. Home builders face increasing cost pressures and buyers lament affordability challenges. The stocks of home builders also felt the pressure in May during a sharp 2-day pullback. Yet, with mortgage rates still near record lows, sentiment remaining high among home builders, and the tailwinds of strong housing demand still blowing, the current “cooling” resembles an overdue normalization of the housing market. Important trends continue to point upward for now. Housing Stocks The iShares Dow Jones US Home Construction Index Fund (ITB) fell 1.8% in May for a rare down month. I finally brought my seasonal trade on home builders to an end given the sharp pullback in May and the softening housing data. ITB remains in a strong uptrend given support at its 50-day moving average (DMA) (the red line below) remains intact. However, I concluded the risk/reward no longer favors the seasonal trade with normalization placing fresh pressures on the Spring selling season. I made one last trade in ITB June call options during the May dip. Per the seasonal trade, I now look toward October/November to get aggressive on trades in housing-related plays. The iShares Dow Jones US Home Construction Index Fund (ITB) lost 1.4% as it continues to pivot around its 50-day moving average in an extended trading range. {The iShares Dow Jones US Home Construction Index Fund (ITB) survived its sharp May pullback with a successful test of 50DMA support.} Toll Brothers (TOL) joined the ranks of stronger home builders with a solid 3.8% post-earnings bounce. TOL looks poised to challenge its all-time high set in early May. {Toll Brothers (TOL) only closed below 50DMA support once during the May pullback. The overall uprtend looks well intact.} Century Communities, Inc. (CCS) held onto its post-earnings momentum through the May pullback. CCS even ended the month hitting a new all-time high. {Century Communities Inc (CCS) maintained a firm hold of its uptrend as defined by the 20DMA (the dotted line above).} Lennar Corp. (LEN) is one of the home builder stocks that suffered most from the May pullback. LEN lost 7.1% on the day it sliced through 50DMA support. The stock traded down to a 2-month low before bottoming. The stock now faces overhead resistance converged at its 50DMA and downtrending 20DMA. While a fresh 50DMA breakout would suggest new light for the home builder trade, I will stay neutral even at that point. {Lennar Corp. (LEN) is still trying to recover from the May pullback which plunged the stock into a 50DMA breakdown.} Housing Data New Residential Construction (Single-Family Housing Starts) – April, 2021 The February data showed softening for single-family housing starts. Starts normalized and returned to the year ago levels and the existing uptrend. March starts bounced smartly off the uptrend, but April starts dropped right back to February levels. While the monthly drop seems alarming, I continue to interpret the data as part of a process of normalization. Starts soared well above trend last year and are now returning to trend. Single-family home sales dropped to 1,087,000 which was 13.4% below March’s 1,255,000 starts (revised slightly upward from 1,238,000). Starts were 58.7% above last year’s pandemic impacted starts. The rate of year-over-year change has remained positive for ten straight months. {Source: US. Bureau of the Census, Privately Owned Housing Starts: 1-Unit Structures , first retrieved from FRED, Federal Reserve Bank of St. Louis, May 30, 2021.} The Northeast led all regions with year-over-year gains. Housing starts in the Northeast, Midwest, South, and West each changed +247.8%, +44.7%, +43.6%, +81.5% respectively year-over-year. Existing Home Sales – April, 2021 The report on existing home sales included the classic signs of a housing slowdown: an increase in inventory accompanied by a decline in sales. So far, I have yet to read a satisfactory explanation for this divergence (for example, did California’s jump in inventory and sales skew the numbers?). Existing home sales dropped to levels last seen July, 2020 and have yet to respond to the start of the Spring selling season. The seasonally adjusted annualized sales in April of 5.85M decreased 2.7% month-over-month from the downwardly revised 6.01M in existing sales for March. For the second month in a row, the National Association of Realtors (NAR) blamed the monthly drop in sales on insufficient inventory despite an increase in absolute inventory. The NAR looks forward to more inventory with “the falling number of homeowners in mortgage forbearance”; a looming an unwelcome event for many households. Year-over-year sales increased 33.9% over last year’s lockdown-impacted sales. Normalization for existing home sales includes a topping pattern. {Source: National Association of Home Builders (the NAHB’s record of the NAR existing homes data)} The absolute inventory level of 1.16M homes increased by 0.09M from March. Inventory dropped 20.5% year-over-year (compare to March’s 28.2%, February’s 29.5%, January’s 25.7%, December’s 23%, November’s 22%, October’s 19.8%, September’s 19.2%, August’s 18.6%, July’s 21.1%, June’s 18.2% year-over-year declines, unrevised). The inventory situation is finally improving ever so slightly even though the NAR did not recognize it as such. “Unsold inventory sits at a 2.4-month supply at the current sales pace, slightly up from March’s 2.1-month supply and down from the 4.0-month supply recorded in April 2020. These numbers continue to represent near-record lows.” Given the slow start to the Spring selling season, I now fully doubt that the NAR’s optimistic forecast for an 8.2% year-over-year increase in single-family existing home sales will bear fruit. The tough comps coming later this year will wipe out the strong year-to-date, year-over-year gain of 20%. Affordability problems present more and more challenges to buyers. Yet, the NAR remains steadfastly optimistic that coming inventory will cool down price appreciation: “The additional supply projected for the market should cool down the torrid pace of price appreciation later in the year.” The average 17 days it took to sell a home set a new all-time record low that slipped by the record of 18 set in March (once again, the NAR did not acknowledge the new record). The on-going year-over-year decline in inventory is on a 23-month streak. The median price of an existing home soared to $341,600 and set a fresh record high. Prices have increased year-over-year for 110 straight months, and April’s was a 19.1% year-over-year gain. The percentage gain was also a new all-time record surpassing the 17.2% record from the previous month. The median price increased from March by 4.7%. Soaring prices are still not slowing down first-time home buyers as a share of all buyers. First-time home buyers took a 31% share of sales in April down just slightly from March’s 32%. The NAR’s 2017 Profile of Home Buyers and Sellers reported an average of 34% for 2017, 33% for 2018, 33% for 2019, and 31% for 2020. Investors picked up the slack with 17% share of sales, up from March’s 15%, up from 10% a year ago. The West towered above all other regions for existing home sales. The regional year-over-year changes were: Northeast +16.9%, Midwest +0.8%, South +15.9%, West +15.5%. All regions registered strong year-over-year price gains. For April: Northeast +22.0%, Midwest +13.5%, South +15.8%, West +19.9%. Single-family home sales decreased 3.2% from March and increased on a yearly basis by 28.9%. The median price of $347,400 was up 20.3% year-over-year. California Existing Home Sales – April, 2021 Unlike the country overall, existing home sales in California are responding to the Spring selling season. An expanding set of records are staving normalization. These sales increased for the third month in a row (after revisions). A monthly 7.4% increase in inventory helped support red hot demand in the state. For April, the California Association of Realtors (C.AR.) reported 458,170 in existing single-family home sales for California. Sales increased 2.6% from March and increased 65.1% year-over-year. At $813,980 the median price jumped 7.2% month-over-month and 34.2% year-over-year. California set yet more records for existing sales in April. $813,980 median price (broke March’s record) $383 per square foot 65.1% year-over-year price increase (from pandemic-impacted levels) The share of homes sold above asking price The sales-to-list price ratio 7 median number of days to sell a single-family home (down from 13 days a year ago and down from 8 in March). The increasing price pressures prompted C.A.R. Vice President and Chief Economist Jordan Levine to doubt the durability of California’s housing market: “Not only do skyrocketing home prices threaten already-low homeownership levels and make it harder for those who don’t already have a home to purchase one, it also brings to question the sustainability of this market cycle.” In other words, the Californian housing market is overdue for normalization. Inventory dropped to 1.6 months of sales in April from 1.7 in March (revised upward). Active listings dropped over 50% year-over-year for the fourth month in a row. San Francisco sat alone as California’s only county that increased listings (22.7%). Still, the county recorded a healthy 165.7% year-over-year increase in sales with the 2nd smallest increase in median price in California at 5.9%. Clearly, buyers are finding relative “bargains” in San Francisco. The sales activity now flies directly counter to the exodus narrative. San Mateo became the first Californian county to crack the $2M median price mark. California experienced a stark skew in sales toward higher-priced markets: “The million-dollar segment increased in demand by more than 200 percent year-over-year, with sales of homes priced $2 million and higher surging over 300 percent from a year ago. Sales of properties priced below $300k, on the other hand, continued to fall precipitously, with the year-over-year growth rate dropping 34 percent in April. Tight housing supply continues to be the primary constraining factor for sales in the lower price segment.” New Residential Sales (Single-Family) – April, 2021 The path to normalization for new single-family home sales includes a peak that stretches out from July, 2020 to January, 2021. New home sales in February dropped to the lowest point since June, 2020. After what looked like a strong start to the Spring selling season for new home sales, April undermined the narrative with a monthly decline of 5.9%. April sales increased 48.3% year-over-year from the pandemic trough. March sales were revised significantly down from 1,021,000 to 917,000. {Source: US. Bureau of the Census, New One Family Houses Sold: United States , first retrieved from FRED, Federal Reserve Bank of St. Louis, May 30, 2021.} Median home prices ended a two month decline and rebounded sharply just short of the all-time high. The 11.4% increase was the second highest since on record (since 1963). Last Fall’s breakout to all-time highs now looks sustainable. April featured a strong skew to higher-end home sales, likely driven by California’s strong performance. The 19% of sales in the $500,000 to $749,999 price range could be a major high (I reviewed the reports as far back as 2014). The share of sales above that price range nudged up from 6% to 7%. The share of sales in the $200,000 to $299,999 price range plunged from 35% to 25%. The monthly inventory of new homes for sale rebounded from March’s 3.6 months of sales to 4.4 months. The absolute inventory level of 316,000 was an increase from March’s 306,000. So, just as with existing home sales, my red flag went up seeing sales decline despite the increase in inventory. The West lagged all regions for a second month in a row for year-over-year sales changes despite being the only region with a month-over-month gain. The Northeast soared triple digits again, this time 100.0%. The Midwest increased 46.7%. The South increased 61.2%. The West increased 11.6%. New home sales in the West remain well off their pandemic highs and are marginally off the pandemic lows. If not for California’s strong performance, the West may well be right back to pandemic lows. {U.S. Census Bureau and U.S. Department of Housing and Urban Development, New One Family Houses Sold: United States , retrieved from FRED, Federal Reserve Bank of St. Louis, May 30, 2021} Home Builder Confidence: The Housing Market Index – May, 2021 The National Association of Home Builders (NAHB) reported no change in the NAHB/Wells Fargo Housing Market Index (HMI) from April’s 83 level. In April, the NAHB pointed to strong demand as a driver boosting confidence despite supply chain issues. May’s report focused on soaring construction costs: “Policymakers must take note and find ways to increase production of domestic building materials, including lumber and steel, and suspend tariffs on imports of construction materials. In recent months, aggregate residential construction material costs were up 12 percent year-over-year, and our surveys suggest those costs are rising further. Some builders are slowing sales to manage their own supply-chains, which means growing affordability challenges for a market in critical need of more inventory.” Accordingly, the NAHB projects more price increases ahead for new homes. The components of the Housing Market Index (HMI) barely budged from April to May while consumer sentiment suffered a large setback. {Source for data: NAHB} While the aggregate HMI remained flat, regional HMI’s moved all over the place. The Northeast plunged from 84 to 77. The Midwest pulled back from 75 to hit 72, a new low for 2021 and the lowest point since August, 2020. The South nudged upward from 84 to 86 for a new high for the year. The West remained at its lofty level of 91. These high levels stand in stark and surprising contrast to the relatively low levels of new home sales. For more consistency, I want to see the West’s new home sales move much higher from the pandemic lows. Home closing thoughts Housing On A Sugar High? Demand and prices in the housing market are both strong. Yet, the Federal Reserve continues its furious pace of purchasing Mortgage Backed Securities (MBS). The traders on CNBC’s Fast Money cannot explain why. As a result, they mused over whether the housing market is feeding off a “sugar high”, a high that inevitably comes crashing down. Is it possible the MBS market remains broken? Insufficient buyers? Whatever the reason, the support for MBS’s is helping to support a high velocity of housing activity. My favorite investment in the MBS recovery remains AGNC Investment Corp (AGNC). I made the case for buying AGNC in the immediate wake of the collapse of the MBS market. {The remarkably consistent uptrend for AGNC Investment Corp (AGNC) looks like a direct beneficiary of support from the Federal Reserve.} Lumber Watch Lumber prices finally cooled off in May. Futures for lumber are still in a strong uptrend as demonstrated by the 50DMA. While this pullback brings some relief to the industry, the accompanying drop in housing sales and starts make me wonder whether cooling lumber prices signal a cooler housing market ahead. This decline could at minimum represent a reluctant slide into normalization. Lumber futures cooled off in May. Earlier in the month, the NAHB posted alarming info on soaring material costs for home builders. Building materials prices are setting new records in aggregate. Chart after chart in this article show soaring prices for steel mill products, softwood lumber, gypsum products, and on-going price increases in ready-mix concrete. Be careful out there! Full disclosure: long ITB call options
CBOE:ITB
by drduru
Short HD; you can do it, I can help.A couple of indicators are showing divergence for the past week or so, as HD has melted up choppily. It needs some relief and is being sustained by erstwhile investors scrambling for a safe investment in a volatile bond market when the banks can't be counted on to manage their risk. I'd suspect that this could continue a little bit, but within the next week or so as the market changes again this should take a pounding. Note the marked divergences and the weakness of the indicators after we passed the shaded area. Today might well be the double top we need to leg it down. The way I see it, the weak technical picture hides an interesting scenario; bond yields calm, money flows back into more conditional investments like tech (this will keep happening to a lesser extent everytime yields 'decline' and consolidate) and away from HD. Bond yields increase and the market panics. Bond yields stay the same and people go back to their riskier bets. In all scenarios HD and other builder, stocks decline in the interum. Perhaps they'll pickup before earnings but they need price discovery now.
NYSE:HDShort
by PreferredStonk
18