AI
Tuesday, November 06, 2007 4:35:09 PM
HOMEBUILDERS:
Although it is hard to imagine this being the bottom based on fundamentals of the sector IMO, purely based on the chart, it could be.
XHB (Homebuilders ETF): Today was a new low ($20.48), but only barely. The previous low was $20.50 (hit twice). Simply looking at the chart (below) - although still in a lower high, lower low mode - it certainly appears that sellers are getting worn out. No matter how shocking the numbers are now, the sector doesn't fall much. Today is a good example.
What can make this a head-fake is simple - time. Those buying at this point have to be assuming a turnaround in earnings sometime by mid 2008 at the latest. I doubt that will be the case - mainly because it will be at least 18 months before extreme inventory levels are worked off. If earnings don't turn around by mid 2008, this ETF will continue to drift lower.
Len
Although it is hard to imagine this being the bottom based on fundamentals of the sector IMO, purely based on the chart, it could be.
XHB (Homebuilders ETF): Today was a new low ($20.48), but only barely. The previous low was $20.50 (hit twice). Simply looking at the chart (below) - although still in a lower high, lower low mode - it certainly appears that sellers are getting worn out. No matter how shocking the numbers are now, the sector doesn't fall much. Today is a good example.
What can make this a head-fake is simple - time. Those buying at this point have to be assuming a turnaround in earnings sometime by mid 2008 at the latest. I doubt that will be the case - mainly because it will be at least 18 months before extreme inventory levels are worked off. If earnings don't turn around by mid 2008, this ETF will continue to drift lower.
Len
Warren Buffet: 5 minutes and 17 seconds of pure, unadulterated, bulletproof, flawless logic.
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