Treasury yields fell after Friday's jobs report and interest rate sensitive stocks got a bounce as utilities, REITs and homebuilders moved higher. My focus is on the Home Construction iShares (ITB) because this group is important to the consumer discretionary sector and housing is key to the overall economy. The first chart shows ITB in a downtrend since late May. The ETF broke neckline support from a head-and-shoulders pattern and remains below broken support, which turns into resistance. Downside, however, has been limited since a big bullish engulfing pattern formed in mid August. Notice how ITB fell back and tested this low in the 20.5 area. It is still too early to call for a trend reversal, but I will be watching resistance in the 21.5-22 area. A follow through breakout here would be bullish for ITB and this would be positive for the market overall. The second chart shows the Homebuilders SPDR (XHB) in a downtrend since late May and testing the 2013 lows.
Have a great weekend!
--Arthur Hill CMT
