I wrote back on 5/4 on my blog that "I'm standing by XHB" that I thought the negativity around housing was excessive and higher prices would eventually come our way. Some of the "smart" money on Wall Street was decisively negative. Among the stories predicting the fall in stock prices of the home builders included this one from Friday the 23rd.

Big investors are betting against housing (on

For now it looks like they may be on the wrong side of the trade. Two primary reasons: one fundamental and one technical.

On the fundamentals housing construction numbers from the Commerce Department were bullish as reported by Reuters:

Housing stocks rallied for a second day after data from the Commerce Department showed sales of new U.S. single-family homes rose more than expected in April and the supply of houses on the market hit a 3-1/2 year high. A day ago, another report showed existing home sales rebounded in April.

While demand is still healthy the chart indicated that the market is still bullish on housing. After printing generally lower prices for two months price hit $30 (the line of defense I cited in my post on May 4th), formed a "spinning top" indicating indecision and then rebounded hard this week.
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