Conclusion, Investment Implications, Strategy

The SPDR S&P Homebuilders ETF (XHB) is amid favorable conditions to continue its recent outright price advance and relative outperformance versus the S&P 500.  We are targeting an additional 14% rise to 70.00 that will remain vaklid above the 56.75 area.

Analysis and Rationale

In seeking to track the performance of the S&P Homebuilders Select Industry Index (the “index”), the SPDR S&P Homebuilders ETF (XHB) employs a sampling strategy. It generally invests substantially all, but at least 80%, of its total assets in the securities comprising the index. The index represents the homebuilders segment of the S&P Total Market Index (“S&P TMI”).

The upper panel of Chart 1 below plots XHB daily since December 2021 along with its 200- and 50-day moving averages, widely-watched major and minor trend proxies.  The lower panel plots the corresponding daily relative performance of XHB versus the SPDR S&P 500 ETF Trust (SPY) along with its 63-day moving average, which we use to identify the Strategic trend of relative performance.

Chart 1

The green highlights in the upper panel point out that XHB has edged above its 50-day moving average as of Jly 19th, indicating an emerging minor bullish trend change.  Note that the previous minor downtrend had been in place since January.  The lower panel shows that XHB has also been in a trend of Strategic relative outperformance versus SPY since Jly 1st.  These conditions suggest a relatively low-risk opportunity to buy XHB and Homebuilders-related assets following a significant decline since the beginning of this year.

Our Updated Sectors & Industry Groups Table

Table 1 below is an updated version of our Sectors & Industry Groups Table, which is always Table 2 of our Monday morning Keys To This Week: Market Sectors & Industry Groups reports.

Table 1

It lists XHB at the top as the newest of these ideas and shows a 70.00 upside target (14% higher than where it’s trading now) that will remain valid above the 56.75 area.  The other 6 ideas in the table have also been updated to indicate current performance and the levels they will remain valid above.