Hey all. Market is looking at another green open to start the day after the housing industry got more good news that housing starts and building permits were both better than expected. Quite unfortunate for us because KB Homes is looking to open between 3-4% above where it was yesterday. I missed the boat on this one, but I know a few of you slipped into it. Congrats! I will still consider an entry on a pullback, which still may occur.
While the data was good, can the market hold onto these gains?
Buy Pick of the Day: Direxion Daily Real Estate Bear ETF (DRV)
Analysis: So, I like the numbers I saw this morning, but like most things, its moving way too fast in the housing industry. These stocks went from 0-60 from yesterday afternoon to this morning. While all the housing stocks are booming this morning, a lot of the rest of the market is just so-so. The question then becomes can residential construction lead the market higher. Or, will it sell off?
My assumption is that the market will get some kind of small pop to start the day and a lot of excitement rushes into the market, but from there, I think the market will start to give up gains throughout the morning. Therefore, I think we should play against residential construction as a lot of these stocks are starting to look very toppy. After a fall to start the morning, DRV could be a great place for us to get involved. Watch for me to update on an entry range as it may change this morning if things get uglier than originally planned.
DRV is nearing its lower band, which is at 20.65 – 20.75. That area is going to see a lot of resistance, which is about the same amount of gain on the upside that many of the homebuilders have as well. At that point, either things are going to sell off or breakthrough. Are investors in these stocks or traders? It’s traders, and they are going to want their gains. When that happens, they will sell off temporarily. At that point, DRV becomes very attractive.
Futures are basically at a standstill this morning, so there is no tell from what direction they are headed. The fact that they aren’t going up though is surprising to me, and that is why the market might be running out of legs.
Watch…
