Bonds & Builders Reverse


The bond market (TLT) and the Homebuilders (XHB) are reversing together.


Bonds down, rates up, home construction is rolling over.


The updated chart of XHB is clear in its up-thrust and testing action.  At this point, it’s unable to push (and close) above the 46.00 level.


Within XHB, we have America’s largest homebuilder, DHI.  Technical indicator MACD is bearish divergent on both daily and weekly time-frames.


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XHB Test:  Will It Fail?


The December 3rd update mentioned we’re in spring position (within a larger up-thrust) and to expect some upward action.


Last session saw a push by XHB to move higher.  That attempt backed off near the close. 


What happens next?


If we’re in a reversal and heading to the low 30s, we can expect a test breakdown. 


Continued upward pressure indicates potential failure of the set-up.  A hard stop for a short position could be around 45.92.  


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Homebuilder’s ETF:  XHB, Up-thrust and reverse


The XHB has reversed.  Our chart shows a clear up-thrust and initial leg down.


Price action may or may not test before heading lower.  There’s always a possibility of reversal to new highs.  However, the weekly chart (closing basis) shows an up-thrust and reversal on its time-frame as well.


Using a Point-and-Figure chart, we get a count that projects down a whopping 36 points.  It should be noted, the XHB top was nearly two-years in the making.  Price action has built up significant downside potential.


With today’s action, price closed weak and below support.  That close below support puts it in spring position for the up-side.  The expectation though, is for any upside action to fail.


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