Submitted by Mark Hanna
Courtesy of MarketMontage. View original post here.
There is a big debate on whether the housing sector is bottoming. Honestly there is no reason to get into the debate – it doesn’t matter what “you” think, it matters what “they” believe, at least as a speculator. Further, unlike the bubble years and the crash years of 2007-2010, housing is usually more regional. With the federal government bubble in D.C., Wall Street and foreign money coming into NYC, the oil boom in the northern plains states, Silicon Valley, et al – there are places where the market is tight and rebounding strongly even as there are struggles elsewhere.
Housing related stocks were the first non defensive group to rally in December 2011 – recall back then all the juice was in defensive utilities, dividend stocks, MLPs, and the like. Then when the light switched on Jan 1, and everyone ran into risk – this group continued a strong run in January and February. After consolidating that move, the stocks are once again a leadership group. And it’s not just builders as the rehab/remodel crowd is also doing well. Recall, Home Depot had not been down one week the entire first quarter. (it has since begun consolidating that huge move)
This morning homebuilder sentiment hit a 5 year high. In the big picture it does not mean much, but the market definitely liked the news. Here are the 2 main ETFs that deal with the sector; the former deals more with the homebuilders themselves while the latter is more of a mix of homebuilders and ‘the supplier base’ if you will. Even as the market corrects, these ETFs are holding steady and going sideways – a sign of major relative strength.
While these look like big runs (which they are), if you pull up 5 or 10 year charts you can see how far they are off the peak. Which might mean opportunity even if housing just bumps along the bottom across the country.
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Any securities mentioned on this page are not held by the author in his personal portfolio. Securities mentioned may or may not be held by the author in the mutual fund he manages, the Paladin Long Short Fund (PALFX). For a list of the aforementioned fund’s holdings at the end of the prior quarter, visit the Paladin Funds website at http://www.paladinfunds.com/holdings/blog
