Chart of the Day – $XHB

by Enis October 15, 2013 11:00 am • Commentary

Citigroup’s earnings report this morning once again mentioned the weakness in the mortgage business.  That follows the weak results in that division from WFC and JPM on Friday.  So it’s as clear as can be that mortgage originations are slowing in the U.S. with higher rates.

Dan initiated a new trade on HD on Friday, partly with that trend in mind.
The recent weakness among housing-related stocks has been more widespread than just homebuilders, which have been declining for many months now.  Appliance companies like WHR (which was down about 6% yesterday after an analyst report citing concerns over decreased appliance demand) and retailers like HD are well below their September highs.

That broad-based weakness has hurt the XHB ETF, which is trying to hold above its 200 day moving average:

Daily chart of XHB, 200 day ma in black, Courtesy of Bloomberg
Daily chart of XHB, 200 day ma in black, Courtesy of Bloomberg

The more important technical level for XHB is $28, indicated in red.  That has served as support on the last 3 major pullbacks in the ETF, so buyers are likely waiting in the wings on a retest of that area.  But each test of support likely weakens their resolve, so keep a close eye on XHB if it does approach $28 in the coming weeks.