In an interview on CNBC, I talked about the fact that we're starting to see the possibility that the housing stocks might (repeat, MIGHT) diverge from their fundamentals for a while. We’re starting to see some cracks in the chart of the ITB home construction ETF as the bond yields have been rising recently, so this ETF is something we need to monitor closely going forward.
The ITB has already broken below its trend-line from March. It is now very close to testing the “neck-line” of a “head & shoulders” pattern (at the $52 level). If it follows up the recent break below its trend-line...with a break below the “H&S” pattern...it’s going to signal a change in the intermediate-term trend for housing stocks. Therefore, if (repeat, IF) it does indeed break below that level, it should also signal a period of at least some underperformance for the housing stocks as we move into the end of the year and early next year...even though we don’t think it will signal an end of the bull market for the housing industry.