ChartWatchers

HOUSING INDEX ($HGX) COMING INTO CLEAR FOCUS

Chip Anderson

Chip Anderson

President, StockCharts.com

The current broader market decline has brought the Housing Index ($HGX) into clear focus; magazine after newspaper after TV show are talking about whether housing is overvalued and ready for a decline. We will save our thoughts for this for another time, but we do have some technical thoughts on $HGX.

We find the chart trending from the lower left to the upper right and what is defined as a "bull market"; but we are finding opportunities to be short with greater confidence if in fact several 'key levels' are violated. First, we expect the 18-week exponential moving average at 527 to be violated rather handily given all corrections of any magnitude have in fact broken below this key level prior to rebounding. The question then becomes whether the bull market trendline is violated; if so then obviously the bull market from the lower left to the upper right will have 'changed' to bearish. And finally, if the 50-week simple moving average is violated...then this would confirm the downtrend has become engrained indeed.

This is our roadmap; we covered our short housing stocks on Friday and now look to sell rallies given an oversold countertrend rally is warranted. We feel this trade may develop into one of the large for the remainder of this year and into 2006.

Chip Anderson
About the author: is the founder and president of StockCharts.com. He founded the company after working as a Windows developer and corporate consultant at Microsoft from 1987 to 1997. Since 1999, Chip has guided the growth and development of StockCharts.com into a trusted financial enterprise and highly-valued resource in the industry. In this blog, Chip shares his tips and tricks on how to maximize the tools and resources available at StockCharts.com, and provides updates about new features or additions to the site. Learn More