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.
On the Monday morning (10/09/24) after Hamas attacked Israel (10/07/24), Mike Paulenoff posted the following heads up for MPTrader members:Another "Crisis Opportunity" could be developing in RTX (formerly Raytheon Technologies) after a prolonged correction finally exhibits signs of downside exhaustion, and because the various combatants around the globe need weapons systems and missiles, lots of missiles... Last is 72.62...RTX established a multi-month corrective low at 68.56 on the Friday before the attack, down 35% from the 104.91 high on 4/19/23.
On April 5, Mike Paulenoff discussed the following with MPTrader members about the significant negative behavior of the equity indices in general and the SPY (SP 500 Equity Index ETF), writing:"... Yesterday's nosedive in the price action left behind a Bearish Engulfing Candle in SPY, SPX, ES, et al... My attached Big Picture Chart of SPY shows the powerful, relentless Oct-Apr. advance from 409.21 to 526.
On March 13, amid a broad discussion about the emerging bull phase developing in the precious metals and miners, Mike Paulenoff posted this about WPM (Wheaton Precious Metals) to our MPTrader discussion room:From a more Silver-Gold perspective (if FCX is perceived to be Copper-centric), let's notice that WPM strength is pushing up against its near-term resistance line in the vicinity of 45.
Right after the opening bell on the morning of October 20, 2023, Mike Paulenoff posted the following GLD (SPDR Gold Trust) commentary to our MPTrader Discussion Room:"For all of the long-suffering Gold Bugs... As we speak, GLD is attempting to take out key 5-month resistance lodged between 181.20 and 184.40, which if successful and sustained, will point GLD to 188-190 next... Last is 183.88...
During the afternoon session of February 15, this is what Mike Paulenoff posted to the MPTrader Discussion Room about the technical setup in the oil service company SLB (Schlumberger):"This name in the oil service sector exhibits a well-demarcated 4-year bullish channel with the SLB price structure upturning off of the lower boundary line in the vicinity of 47.00 (the 2/13/24 low) amid a glaring double non-confirmation of the weakness into the lower channel line.
