“Building” A Base?
The saying goes know what you own. Many would apply that to the Peter Lynch way regarding individual names, but here I am talking about what’s in your ETF. The two dominant funds in the homebuilding space are ITB and XHB. The ITB is a more “pure-play” way to play the space, as the top 4 components make up more than 40% in DHI LEN NVR and PHM. The XHB on the other hand has its top 4 holdings in periphery plays, although it’s not as concentrated as with MHK OC MAS and ALLE making up 16% of the ETF. Both have been acting in harmony lower by 26% YTD, but the ratio chart below shows an affinity toward the ITB as of late. Is this group’s softness foreshadowing further strength in the 10 year? Only time will tell if the move above the “round” 3 number on the TNX holds, but to start “building” a base these two funds must first sprint away from their recently reclaimed 50-day SMAs.