Selling pressures hit Wall Street as investor confidence in the Euro zone further deteriorated following Fitch Ratings’ statement that continuing European debt woes would pose a risk to American banks. On the home front, investors digested yet another better-than-expected economic releases, as industrial production expanded 0.7% in October, surpassing analyst expectations of 0.4% growth. Gold drifted sideways on Wednesday, settling around $1,760 an ounce as the trading session drew to a close. Crude oil on the other hand soared higher, upwards of 2% on the day, climbing above the $100 mark and settling just below $102 a barrel [see Free ETF Webinar: The Importance Of Agricultural Commodities].
Investors will shift their focus onto the U.S. housing sector as new housing starts data for the month of October is released, making the State Street SPDR Homebuilders ETF (XHB) our fund to watch for today [see XHB Scorecard & Ranking]. Analysts are expecting for 605,000 new starts, which is a modest decrease from the previous months reading of 658,000.
Since tumbling below its 200-day moving average (yellow line) in late July of this year, XHB has endured a serious correction, although the fund appears to have established support above the $13 level [see also Six Noteworthy ETF Innovations]. Notice how this ETF held its head above $13 a share on 8/9/2011 and again on 8/22/2011. XHB was fairly range-bound over the next month, once again re-testing support at the $13 level on 9/22/2011. This ETF briefly slipped below support all the way down to $12.21 a share on 10/4/2011, although it quickly regained momentum and went onto to gain a whopping 30% over the next month and a half [see XHB Returns].
Despite this truly impressive comeback, establishing a long position in XHB at current levels is still quite speculative seeing as how the fund failed to establish support above its 200-day moving average on 10/27/2011. Currently, this ETF is trading right underneath its 200-day moving average and will likely look to summit the $17 level in the coming weeks.
This homebuilders ETF may very well climb above $17 a share if the latest housing market data shows signs of recovery. Likewise, a worse-than-expected housing starts data release may pave the way for profit taking [see How ETF Investors Can Save $415 Million]. If XHB succumbs to selling pressures, it may tumble below $16 a share, or perhaps even lower depending on investors reaction. In terms of downside, this ETF has minor support around $15 a share, while major support lies all the way down at the $13 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
Disclosure: No positions at time of writing.