Bearish Call On Home Builders ... What's Next For ITB?
by Mike Paulenoff
June 19, 2022 • 12:00 AM EDT
Last Wednesday, prior to the official FOMC rate hike of 75 bps, Mike Paulenoff warned MPTrader members about the likelihood of additional weakness in the beleaguered home builders, writing about the ITB (iShares US Home Construction ETF):
"In that, neither my pattern work nor my intermediate-term Momentum gauges offer much technical confidence that ITB will be able to carve out a meaningful corrective basing area in and around 53.00, I am expecting the price structure to head still lower to test the next key Fibonacci support plateau in and around 46.00."
Mike added, "The fact that the Fed intends to maintain its rate hike cycle through Q3, 2022 at a minimum (unless today's FOMC policy statement and Powell press conference change the timeline), and given the sharp back-up in mortgage rates, the crash in demand for mortgages, the slowdown in economic growth (recession?), and residual upward pressure on prices in general, and housing in particular, the prospects for a powerful, sustained upside reversal in ITB appears low-to-none."
ITB, which was trading at 53.18 at the time, proceeded to nosedive into Friday's late-session 11-month corrective low at 48.02, a down-move of 9.7%, bearing down on Mike's next lower key technical level at 45.80-4600, which represents the Fibonacci 62% support plateau of the entire post-March 2020 Pandemic bull phase.
The ability of ITB to contain further weakness in and around 46.00 will provide Mike with valuable technical and macro market information about the underlying strength or weakness of the housing sector, the consumer, and the outlook for mortgages (longer-term interest rates). Mike's work argues that ITB buyers need to emerge to imbue an otherwise dismal and still-deteriorating intermediate-term technical setup with an initial measure of confidence to avert triggering the potential for a "death spiral" in the housing and home building sectors.
Join Mike and MPTrader members next week as they monitor, chart, and discuss the ITB as well as many individual names, ETFs, macro indices, commodities, Bitcoin, and Precious Metals miners in real-time as they brain-storm hour-to-hour navigation of the current challenging trader and investor environment.
Three hours before the July Fed 31, 2024 (FOMC) meeting, I posted the following chart commentary about my technical setup work on 10-year Treasury YIELD and its actionable longer-term Treasury bond ETF, the TLT (20+ Year T-bond, ETF):Heading toward Fed Time, 10-year YIELD and TLT (20+ Year T-bond ETF) certainly appear to be anticipating lower interest rate news or innuendos from the FOMC statement (guidance) and Jay Powell in his post-meeting press conference.
On August 15, with XLV (Healthcare SPDR, ETF) approaching Mike Paulenoff's target zone (noted in an April 18th post), Mike responded to an MPTrader member's question about whether it was "time to sell and find something with more potential?" Mike wrote: "My short answer: no, it is not yet time to sell (although I will never dissuade anyone from taking profits and from ringing the cash register). My pattern and momentum work argue that upside potential extends from 156 to 161.
On August 6th, when UBER was trading 62, this is what Mike Paulenoff discussed with MPTrader members about the stock's technical setup in the immediate aftermath of the company's quarterly earnings report:"UBER... produced stellar earnings, albeit a bit light on next quarter's bookings. The stock is up 5.9% in pre-market trading within a near-term setup that argues yesterday's spike low at 53.25 ended a 35% correction off of the March high at 82.14.
At 10:45 AM ET on Friday July 26, 2 hours 15 minutes after the release of important PCE (Personal Consumption Expenditure) inflation data, this is what Mike Paulenoff discussed with MPTrader members about SPY (SPDR SP500 ETF):"If I have a concern today it is the unfilled up-gap left behind from last eve's 4 PM ET close at 538.32 to the low of the AM session so far at 541.25.
On June 24, 2024, I posted the following chart-based commentary about PFE (Pfizer, Inc) to the MPTrader discussion room:PFE (Pfizer) has the right look of a setup that is on the verge of entering a central, bullish price thrust from within a December-June rounded bottom formation. Only a failure to push up through and close above the 200 DMA, now at 28.94, followed by a decline that breaks last week's low (6/14) at 26.87 will Neutralize my currently bullish bias... Last is 28.27...
