ago that the overall sentiment on housing had gone from extreme
doom and gloom to outright optimistic recently. What makes that
dangerous is that the recent price action in housing stocks has
been very weak. In other words, there are a lot of knife catchers
out there. If things bottom at despair, we simply aren't seeing
that in housing stocks here.
Getting right to it, the
iShares US Home Construction ETF
(NYSEARCA:ITB) has completed a very bearish looking
head-and-shoulders pattern. In fact, it found resistance right near
the neckline and formed a doji. There is not much to get excited
about here if you are bullish.
How much further this group can drop is anyone's guess, but the
path of least resistance is clearly lower until that neckline is
, I noted three concerns for the bulls. Now, add the action in
housing stocks as another worry.
Lastly, ITB recently dropped 20%. This is now officially in "bear
market" territory. That is all fine and dandy, but does it matter?
It looks like more losses could be in the cards, based on history.
There have been three others times it dropped 20% (ITB just started
trading in 2006). One month and three months later, it was lower
every single time. Going out more it bounces, but near-term
concerns are warranted.
Overall, there are still many warnings out there that make being
extremely bullish tough. It appears some more weakness or at least
consolidation is in the cards.
This article by
Ryan Detrick, CMT,
was originally published on
Schaeffer's Investment Research
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