These Bearish Divergences Remind Us Of 2007

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October 10, 2018 6:23am NYSE:XHB

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From Chris Kimble: We did an earlier chart reflecting that home builders are diverging similar to 2007.


Housing is a critical component to the economy and stock market, as we found out a decade ago. And unfortunately, current housing market concerns don’t end there. There are several housing and real estate related indexes and ETFs that are flashing caution here.

In today’s 4-pack of charts, we can see four different divergences similar to 2007 that is taking place. These are but a mere warning, as divergences can go on for some time before they take effect.  As well, they can work themselves out over time with consolidation.

That said, they are concerning. The top two charts illustrate how the housing construction and real estate sectors are diverging from the broader market (at point 1). Then there’s the bank index doing the same in the lower left. Lastly, the broad market S&P 500 is showing its own internal momentum divergence as well (point 2) – bottom right.  Keep an eye on these in the weeks ahead!

4-Pack of Housing / Real Estate Charts

The SPDR S&P Homebuilders ETF (XHB) was unchanged in premarket trading Wednesday. Year-to-date, XHB has declined -18.05%, versus a 8.13% rise in the benchmark S&P 500 index during the same period.

XHB currently has an ETF Daily News SMART Grade of C (Neutral), and is ranked #32 of 41 ETFs in the Consumer-Focused ETFs category.


This article is brought to you courtesy of Kimble Charting Solutions.


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