Sector Week-in-Review: Homebuilders Hit Hardest in Dismal Week

Nick Perry (Schaeffer's Investment Research) submits: This week we find a strong bias to the downside as two-thirds of my list lost two percent or more (click to enlarge):

Commodity-related funds were the only ones to make much headway this week, as gold, oil, and silver top the list. Bonds, utilities, and the energy funds held near breakeven, but couldn't muster much of a rally.

Looking to the bottom half of the graph highlights the selling pressure seen this week. Regular readers of this space will note that we often find the maximum moves contained near three or four percent for the week. This chart shows that the smallest losses shown here are still above that level.

Housing stocks where hardest hit, helped in part by an earning's warning from D.R. Horton (DHI) that put pressure on the group today. Other weak groups include the clean energy fund, networking and transports.

For a longer-term perspective, the bullets below show how the ETFs listed above have faired during the past six months, prior to this week.

Prior Six-Month Returns for This Week's Top Performing Sector Exchange Traded Funds:

* streetTRACKS Gold (GLD) +15.9%
* US Oil Fund (USO) n/a
* iShares Silver Trust (SLV) n/a
* iShares DJ U.S. Energy (IYE) +5.2%
* SPDR-Energy (XLE) +5.0%
* iShares Lehman 20+ Year Bond (TLT) -7.4%
* Utilities HOLDRS (UTH) +1.2%
* SPDR-Utilities (XLU) +1.5%
* iShares Lehman 7-10 Year Bond (IEF) -4.2%
* iShares DJ U.S. Utilities (IDU) +1.8%
* iShares Lehman Aggregate Bond Fund (AGG) -3.2%
* PS Utilities (PUI) +5.3%

Prior Six-Month Returns for This Week's Bottom Performing Sector Exchange Traded Funds:

* iShares GS Technology (IGM) -13.1%
* PS Software (PSJ) -7.0%
* PS Water Resource (PHO) +2.5%
* Software HOLDRS (SWH) -11.1%
* PS Networking (PXQ) -11.3%
* PS Leisure & Entertainment (PEJ) +0.2%
* iShares DJ Transportation Average (IYT) +15.0%
* PS Hardware & Consumer Electronics (PHW) -6.9%
* iShares GS Networking (IGN) -15.5%
* PS WilderHill Clean Energy (PBW) +6.6%
* PS Building & Construction (PKB) -13.0%
* SPDR Homebuilders (XHB) n/a

In past columns I have noted how this table was pointing to softening intermediate-term momentum and that is still the case. Previous leaders, such as energy funds, have seen their advances flatten out while groups in technology, networking and housing are showing double-digit declines. In and of itself, this slowing momentum doesn't portend great doom, but watching it can help warn when uptrends are breaking.

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[Asif]

The SPDR Homebuilders (XHB) includes Sherwin Williams and Home Depot amongst its top holdings. If you are interested in a list of just homebuilders, check out my previous post on Seeking Alpha about <i>homebuilders in pain</i>.

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