Could it be? Housing stocks actually leading the market?

02/03/2010 8:30 am EST


Jim Jubak

Founder and Editor,

Bounce or trend? That’s the question.

The dollar took a break yesterday as it met some resistance after moving up so strongly in January.

Commodities hit support that then rallied.

At least that’s one way to look at it. From a purely technical point of view all we’ve seen this week is a bounce in commodity prices on a dip in the dollar. The United States Oil Fund (USO), for example, bounced off the bottom o its four-month trading range and its 200-day moving average.

But looking at the sectors and stocks that are moving together, you could also argue that the upwards move of the last two days is a reaction to news indicating that U.S. economic activity is picking up—fourth quarter U.S. GDP (announced last week) showed 5.7% growth—and that we might finally be seeing the bottom for home builders.

D.R. Horton (DHI) announced its first quarterly profit since 2007 before stock opened for trading on Tuesday and the stock closed up almost 11% for the day.

But D.R. Horton wasn’t alone.

In the United States the entire Dow Jones Home Construction ETF (ITB) rose by 5%. And overseas James Hardie Industries (JHX), the largest seller of home siding in the United States climbed almost 4% in Australia and 2% in New York.

The move to the upside over the last two days has come on weak volume, however. What you’d expect to see if the market has turned is rising volume when stocks are advancing to indicate that the move is bringing buyers into the market.

What we’re seeing so far is a move to the upside that hasn’t convinced very many investors that it will stick around for a while.
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