{"id":26021,"date":"2025-12-19T07:30:00","date_gmt":"2025-12-19T12:30:00","guid":{"rendered":"https:\/\/jeffclarktrader.com\/market-minute\/?p=26021"},"modified":"2025-12-18T11:16:04","modified_gmt":"2025-12-18T16:16:04","slug":"its-too-early-to-bet-on-a-rally-in-homebuilders","status":"publish","type":"post","link":"https:\/\/jeffclarktrader.com\/market-minute\/its-too-early-to-bet-on-a-rally-in-homebuilders\/","title":{"rendered":"It\u2019s Too Early to Bet on a Rally in Homebuilders"},"content":{"rendered":"

Housing stocks have further to fall.<\/p>\n

Even if the seasonal bullishness plays out this year, and we get a rally in the broad stock market, the homebuilding sector is not likely to participate.<\/p>\n

The setup in the S&P Homebuilders ETF (XHB)<\/a> still looks bearish.<\/p>\n

Here’s the chart…<\/p>\n\n

\"\"<\/figure>\n\n

We turned bearish on the homebuilders<\/a> in early September. The stocks had been rallying in anticipation of the FOMC cutting interest rates – which would lead to lower mortgage rates and more home sales. That’s bullish for the stocks.<\/p>\n

So, investors were piling into the builders prior to the event.<\/p>\n

XHB rallied from $93 per share in June – when rumors of a rate-cutting cycle first began – to $119 in September. That’s a 28% gain in just three months.<\/p>\n

But, we were skeptical of the move. A lower Fed Funds target rate does NOT always lead to lower mortgage rates. So, we argued the rally in the homebuilders was based on a false premise. The stocks were likely headed lower.<\/p>\n

Indeed, XHB peaked just prior to the Fed rate cut. It would decline 18% over the next two months.<\/p>\n

Recently, though, the housing stocks have come back to life. XHB is up 6% in less than a month. The stock is coiling around its various moving average lines – building energy for the next big move.<\/p>\n

And, with the Fed having cut short-term rates once again, lots of financial television talking heads are suggesting the next big move for the housing sector will be higher.<\/p>\n

I’m not so sure.<\/p>\n

Last month, as XHB fell to a lower low, all of the momentum indicators at the bottom of the chart were making lower lows as well. This action confirmed the downtrend.<\/p>\n

The lack of any “positive divergence” suggests that any bounce would be short-term only, and XHB would come back down and make at least one more lower-low. So, it seems to me the next big move for XHB will be to the downside.<\/p>\n

The good news for housing bulls, though, is the recent rally was strong enough to pull the momentum indicators off the bottom. Now, if XHB declines to a lower low, the momentum indicators are all likely to make higher lows.<\/p>\n

That will create the sort of “positive divergence” that sets the stage for an intermediate-term rally phase.<\/p>\n

For now, though, it’s too early to bet on a rally in the homebuilders.<\/p>\n

Best regards and good trading,<\/p>\n

\"Signature\"<\/p>\n

Jeff Clark
\nEditor, Market Minute<\/em><\/p>\n\n

\n

Free Trading Resources<\/strong><\/p>\n

Have you checked out Jeff’s free trading resources on his website? It contains a selection of special reports, training videos, and a full trading glossary to help kickstart your trading career \u2013 at zero cost to you. Just go here<\/a> to check it out.<\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

Housing stocks have further to fall.<\/p>\n","protected":false},"author":100,"featured_media":0,"comment_status":"closed","ping_status":"0","sticky":false,"template":"","format":"standard","meta":{"_acf_changed":false,"ep_exclude_from_search":false,"service":"","footnotes":""},"categories":[1],"tags":[],"publication":[10],"person":[7],"newsletter-type":[],"ticker":[],"class_list":["post-26021","post","type-post","status-publish","format-standard","hentry","category-market-minute","publication-market-minute","person-jeff-clark"],"acf":[],"_links":{"self":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/26021","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/users\/100"}],"replies":[{"embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/comments?post=26021"}],"version-history":[{"count":1,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/26021\/revisions"}],"predecessor-version":[{"id":26027,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/posts\/26021\/revisions\/26027"}],"wp:attachment":[{"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/media?parent=26021"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/categories?post=26021"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/tags?post=26021"},{"taxonomy":"publication","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/publication?post=26021"},{"taxonomy":"person","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/person?post=26021"},{"taxonomy":"newsletter-type","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/newsletter-type?post=26021"},{"taxonomy":"ticker","embeddable":true,"href":"https:\/\/jeffclarktrader.com\/market-minute\/wp-json\/wp\/v2\/ticker?post=26021"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}