Homebuilders DR Horton and Pulte Group set new post-election highs last week despite weaker than expected housing data from the National Association of Home Builders and the Census Bureau. All five profiled today remain well below their July 2005 highs.
Meanwhile, Lennar and Toll Brothers have regained upward momentum, while KB Home lags with a negative weekly chart.
Here’s the housing data followed by the weekly charts and trading parameters for the five largest homebuilders.
On Sept. 18, the NAHB reported that their Housing Market Index slipped three points in August to 64. This measure of housing sentiment peaked at 71 in March versus its all-time high of 72 set in June 2005, one month before the homebuilder stocks peaked. Hurricanes Harvey and Irma intensified concerns about the supply of labor and cost of materials.
On Sept. 19, the Census Bureau reported that single-family housing starts, the NAHB benchmark, were reported at a seasonally-adjusted annual pace of 851,000 units in August versus an originally reported 856,000 in July. Single-family starts are up 8.9% year over year. Members estimate that the area damaged by Harvey and Irma covered 14% of the national production. They believe that builders will benefit from rebuilding and restoration projects.Courtesy of the National Association of Home Builders
The NAHB HMI at 64 in September is shown in blue with the scale at the left side of the graph. Single-family housing starts is in red and is shown on the right side of the graph. This reading is 856,000 for July, which is the level in today’s graph. Note that the HMI is leading the rise in starts by a significant margin, which should be considered a warning. When the index was 72 in June 2005, single-family starts were approaching 1.8 million units, not struggling at more than half that pace.Global Market Consultants
D.R. Horton (DHI) ($37.57 on Sept. 19) is in bull market territory, 40.8% above its Nov. 9 low of $26.69, and set its multiyear intraday high of $37.78 on Sept. 19. The stock is 12.3% below its July 2005 peak of $42.82.Courtesy of MetaStock Xenith
The weekly chart is positive with the stock above its five-week modified moving average of $36.41. The 12x3x3 weekly slow stochastic reading is projected to rise to 75.74 this week up from 71.96 on Sept. 15.
Investment Strategies: Sell strength to my monthly risky level of $40.08. My annual pivot is $35.04. Buy weakness to my semiannual value level of $30.48.
KB Home (KBH) ($21.28 on Sept. 19) is in bull market territory, 49.5% above its Nov. 8 low of $14.17, and set its multiyear intraday high of $24.37 on July 12. The stock is 75.2% below its July 2005 peak of $85.45. KB Home is also in correction territory, 13.1% below its July 12 high.Courtesy of MetaStock Xenith
Richard Suttmeier, a former Treasury bond trader, has 45 years experience in the financial markets. He's an engineer by education with a master of science degree.