Home Sweet Home:

The homebuilders have sprouted higher this week, and the question is if this is a dead cat bounce or the start of something inspiring. Of course, no one knows but the daily chart of the XHB showed zero follow-through below a bear flag breakdown, and then consecutive bullish piercing line candles added to the bullish theme. Not seen on the chart below was the gap fill from the 7/10 session too. What is most impressive to me is that as it has advanced 3 of the last 4 days all of them CLOSED right at highs for the day and volume has been firm. I always like to mention there is no reason to catch a falling knife until a technical catalyst presents itself and that is precisely what has taken place. Notice on the WEEKLY chart it is trying to put an end to a 6-week losing streak with a bullish engulfing candle heading into Wednesday, with CPI which will certainly have a big move. Interestingly the 10-year yield, which has a dramatic impact on the ETF, recorded a doji candle Tuesday, which was also a bearish harami cross. As often is the case the technicals will sniff out the situation before anything else as the last 4 days for the XHB may have predicted the ominous candle on the TNX. I think this may have room back to the bull flag breakout near 4.6%.

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