Is it time to move back into the homebuilding sector?
Discussed in this article: SPDR S&P Homebuilders ETF ( $XHB )
I want to look at Homebuilders ( NYSE:XHB ) this weekend. I think this is a busted group and the reasons should be obvious, it has everything to do with interest rates. The bond market has broken out, bonds are being sold, and rates are going up on the ten-year. That means that not only are mortgages going up but also refi’s. Folks aren’t really refinancing that much anymore, that’s already peaked.
The homebuilders have basically, in my view, kind of run their course. That’s not to say that they won’t bounce back at some point, unlike several years ago, it doesn’t seem like any of them are going to go to zero. Look at 50-day moving average here on the XHB; support, all of these different areas, support, even here, even here we got support. But then there’s a lower high clear break of the 50-day moving average, and now where are we? I see this as you got to climb out of that box pretty soon or bad stuffs going to happen.
I want to look specifically at Lennar ( NYSE:LEN ) here. We zoom out here a bit; this question was, is it a top or is it consolidation? I would have to say that that question has been answered; not in the term of consolidation but rather this is a top.
So what I want you to do is stay away from Homebuilders ( NYSE:XHB ); if anything start shorting them on any kind of rally. I don’t really know exactly what the catalyst would be for a rally at this point but I think they’re really, at least as I look at Lennar ( NYSE:LEN ), a little bit too late to short right now. I don’t like to short stocks that have gone, in this case, from the mid thirty-sevens down to thirty-four; that’s a pretty big move, that begs for a little bit of a snap-back. If Lennar ( NYSE:LEN ) comes up a dollar or two, I would say this is a good opportunity to short it.