Trading Strategy – Spdr S&P Homebuilders ETF

Home prices continue to rise faster the average household incomes. The Case-Shiller index showed a 5.8% YoY rise in prices.  Nonetheless, homebuilders have reported strong results.  The Spdr S&P Homebuilders ETF (XHB) broke out to new high last week, up 3.51 percent despite disappointing new home sales and housing starts. The ETF has risen over 17 percent YTD while the S&P is up more than 12 percent.  Now the question is whether the rally has more legs?  Below is an update look at a trade in XHB.

The graphic below is from our “U.S. Market Trading Map”, show the near-term technical bias and trading ranges.  As shown, the underlying is in a short-term bullish trend when the price bars are painted in green.  The underlying is in a short-term bearish trend when the price bars are painted in red.  The yellow bars identify period of neutral or sideways trading pattern.  Additionally, the light-blue shading represents the short-term trading range.  A move above or below that range is considered overbought (as represents by the red shading) or oversold (as represents by the dark-green shading).  Readings above or below the red and green shaded areas are considered extremely overbought or extremely oversold.

Chart 1.1 – Spdr S&P Homebuilders ETF (daily)

Our “U.S. Market Trading Map” painted XHB bars in bright green (strong buy).  XHB has been on a tear in recent days after the early September pullback found support near the late August’s breakout point.  Friday’s upside follow-through confirmed Thursday’s bullish breakout above the early September’s high, signify…Click here to read more.

You see, our trend-following system is very unique as it attempts to pick turns before others see them. Timing is everything and if you’ve applied our system correctly, you should have made a killing in any markets.


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