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Framing a Building Collapse (XHB)

Posted on April 22, 2021

Today’s trade is brought to you by the New World Order – the same slime that wants you to give up all that’s meaningful in this world, and … well, just trust them.

Alan B. Harvard will have more to say about the so-called New Age in a coming letter, but today we’ve got more pressing business.

Let the foundations shake!

Today’s trade is pinned on the SPDR S&P Homebuilder ETF (NYSE:XHB), an ETF that’s only marginally related to homebuilding per se, and more geared toward materials and furnishings offerings like Lowe’s, Home Depot, et al.

Either way, though, the homebuilder run has been perfectly Babellian, and we believe the biblical crash and burn that followed that tower’s construction is about to be repeated.

Why?

  • The intermediate trend of interest rates has flipped and is now heading higher.  That should cool the housing market somewhat.
  • And the transition out of Batflu buying mode should also weigh on XHB.
  • Moreover, we expect the current stimulus to do precious little to stem what we see as a coming retrenchment among consumers.
  • Wall Street will also add to the homebuilder misery by rotating out of an overbought sector into a new asset du jour.

Have a look at the WEEKLY chart for the last two years –

Technically, we have –

Many happy returns,

Matt McAbby

 

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