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The recent drop in rates has given the home construction sector quite a boost.  The XHB(S&P Homebuilders Index) is beginning to break free of a month long consolidation pattern(Bull Flag).  The 200 day moving average has held of the lows of this orderly pullback and as the week comes to a close the 50D will trace out a bull cross. 

A key hurdle in the near term is the March high($39.05).  A clear take out of this level could spark quite a run.  On the downside, a close back below $37.60 would violate this week’s low signally more consolidation is on the way. 

Top six weightings in the XHB:  A.O. Smith(AOS), Lowe’s(LOW), Owens Corning(OC), Johnson Controls(JCI), Home Depot(HD), Toll Brothers(TOL). 

At time of publication we are long HD, LOW and TOL in some managed accounts.