Profit taking pressures continue to sweep over global markets as investors expressed their concerns over the latest developments in the debt burdened currency bloc. Greece will host another round of elections in an effort to form a ruling coalition, although the bigger question at hand is whether or not the nation will keep its spot in the Euro zone. Amidst the looming uncertainty, major equity indexes on Wall Street closed in red territory for another session, while gold futures plunged over 1% on the day, settling just below $1,545 an ounce [see also Have Gold ETFs Lost Their Luster?]
The onslaught of economic data releases on the home front continues and investors will focus their attention on the health of the housing market later today. Housing starts data is expected to come out at the opening bell, and as such, our chart to watch for the day is the State Street SPDR Homebuilders ETF (XHB). This fund may see an increase in trading volumes depending on how investors react to the latest report; analysts are expecting for 690,000 housing starts in April versus the previous reading of 654,000 [see also 3 ETFs For A Euro Zone Double-Dip].
The robust uptrend in XHB is undeniable; notice how this ETF has been climbing higher along a steep support line (blue line) since bottoming out at $12.21 a share on 10/4/2012. This ETF has been consistently making higher-highs and higher-lows since the start of 2012, whereas fundamental economic data from the housing market has been modestly upbeat. It’s also worth nothing that XHB has been incredibly resilient over the past few weeks, unlike broad-based equity indexes which have been seriously beat down from all of the resurfacing Euro zone drama [see also 5 Simple ETF Trading Tips].
Another piece of bullish evidence is the very high trading volume yesterday, which suggests that investors are still willing to buy in, despite the incredible run-up thus far [see XHB Technicals].
If the latest housing starts data blows past expectations, U.S. equities, and homebuilders stocks in particular, may have the wind at their backs. In terms of upside, XHB appears to poised to re-test resistance at the $22 level, at which point we would advise short-term traders to lock-in profit in case profit taking pressures develop soon thereafter. On the other hand, a dismal report or more Euro drama could easily sink XHB. In terms of downside, this ETF has minor support at $21 a share, followed by major support at the $20 level. As always, investors of all experience levels are advised to use stop-loss orders and practice disciplined profit taking techniques.
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Disclosure: No positions at time of writing.