EarningsBeats.com Digest for November 22, 2021
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Mixed Signals on Home Construction Stocks
First, it's important to note that home construction ($DJUSHB) LOVES the November through January period. It doesn't seem to make sense, but if we remember that the stock market looks AHEAD, then maybe it makes perfect sense. Anyhow, check out these average calendar returns by month, dating back the past two decades:
From a technical perspective, the price action has been solid as Friday's intraday high actually pierced a major resistance level just below 1650 from May 2021. The PPO is advancing solidly, indicative of accelerating bullish momentum:
One big problem that I see, however, is the AD line, which has barely budged higher during the past 6-7 week advance. That's quite unusual and I'm not really sure what to make of it, except that I'd make sure I kept my stops in place if I traded any homebuilding stocks. The other technical negative that I see is the relative strength line of home construction vs. the benchmark S&P 500. It's turned up here in November, but still has plenty
of work to do to clear the August relative high. I'm okay sticking with the group short-term, but if the rising 20-day EMA doesn't hold with a weak AD line and relative weakness, I'd transition into another area of the market.
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Tom Bowley
Chief Market Strategist
EarningsBeats.com
Better Timing. Better Trades.
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