E Home Construction Stocks Showing Relative Strength

In my prior post on the DJ U.S. Home Construction Index, I said that “the first sign that the Index is possibly recovering would be a solid close above its monthly moving average, which comes in around the 750 level.” The Index has shown better relative performance than the broad market for the last three months or so. Below is the daily chart. We got a strong push up from the December lows and we need to see if the Index can stay above the 670 level for the pink moving average line to cross the blue moving average line to the upside. If that occurs then the potential resistance area at 737-752 becomes next hurdle (about 750 on monthly). But if the Index closes below the 670 level, then I think it has entered a range.

The second daily chart shows the Value Line Geometric Index. After a strong push up from its December lows, it is currently at possible resistance area (510-517) coming from the October and November lows. Last upswing is equal in length in terms of magnitude but longer in duration compared to last downswing (based on my proprietary swing definition), which is positive. If the Index can break through the 517 level, then the down sloping blue moving average line becomes next hurdle. As long as the Index stays above the 490 level, I think it has a chance to go higher. But keep in mind that the longer term trend here is still to the downside.

 

Disclosure: The analysis provided here is usually part of the analysis the author uses when he is designing and managing his investment portfolios. 

Disclaimer: The analysis presented ...

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