Here Come The Homies

The other day we had the economic report regarding the lowest number of building permits being issued in 17 years. I said - that's the bottom - apparently a lot of hedge funds read me because -

XHB

That's the homie sector ETF and, yes that's a cross over. What I like about this cross over and I don't like about the one several days ago on 05/09 is that this one was preceded by a BOB formation too. And that is an excellent entry into the cross over.

Here's a couple of builders and guess what


And my favorite - DHI


I'm not suggesting that you run out and get some - but I'd certainly keep an eye on XHB for awhile and if you get a weekly cross you might want to get real re: real estate.

Homies

The homebuilder sector has been on the down and out for awhile. I just finished reading in Seeking Alpha about Hovnanian’s “gruesome quarter” and indeed it was gruesome. The best part however was the way the CFO lowered expectations for the coming year. Now if they post any profit at all it will be a prelude to the second housing boom. That was the good news – they are at rock bottom, they can only go up, and they are positioned for some bad quarters ahead.

Then I looked at the chart – and you can see for yourself that we all should have been in housing for at least a month already if not more.



You see in November where on the weekly chart the candle bisected all three averages? That followed an obvious blow-off bottom the week before. Then the only thing that happened on the “gruesome quarter report” was that the stock “kissed the EMA 8” (as I call it) and rebounded smartly. All of this together suggests to me that these stocks (TOL, DHI, KBH, CTX and HOV) might actually develop some legs in the New Year. And if you don’t know which one to buy there is always XHB. The fact that its chart looks exactly like HOV’s is not a coincidence just a fact. The best part of this chart is the increasing volume since July. Brave souls would have bought on that indicator alone. Notice also the bisecting candle in mid-November.



Now I don’t particularly like “idea” stocks as in “my neighbor’s sister in law’s kid's best friend forever said that she doesn’t like this, that, or the other.” Those kinds of stocks always cost me money way back when. But I do like distressed stocks and the Homies have been distressed for a year. It might just be time to get some.

Now, of course, the last several weeks could be read as a rounding top and those steeples might mean a little more downside so if you do get involved stay awake, stay aware and be ready to get out if you can't take the pain.

As always this is not advice – just a guess – just like that bald guy on TV who is always foaming at the mouth and spitting at the camera – good ol’ what’s his name.