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Trying to Mount a Comeback

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Stocks are trying to mount a comeback, and fight their way into positive territory. The software sector has turned positive, as has healthcare. Even the triple Qs are dipping in and out of positive territory. The Dow is down 15, well off its lows, and likewise, the S&P 500 is only down 1.70.

Housing Next?

Some of today's selling was sparked by weak retail sales. Before the numbers came out, certain retail stocks had already begun to tank. Could the current performance of homebuilding stocks be a reflection of next weeks housing starts data?

Dow Jones Home Construction Index

The Dow Jones Home Construction Index (DJUSHB) has been in a steady up trend since 2000. That trend came close to being broken in June when it dipped below the trend line. But homebuilders were able to rally, and set a new high at 304. July has been tough, and the index has lost 51 points. That once again puts the index below the 50-day moving average and long- term up trend. The 200-day moving average is still intact, but the recent performance hasn't been good.

Beazer Homes Daily Chart

Beazer Homes (NYSE:BZH), a Premier Investor short play, is also looking susceptible after losing 20% over the past few weeks. BZH now sits below the 50-day moving average, and four-month up trend. The 38.2% retracement at $38.2 is offering some resistance today, but the MACD is diving quickly.

Pulte Homes Daily Chart

Pulte Homes (NYSE:PHM) has also had a miserable performance lately, losing over $13 over the past few weeks. Now below both moving averages, the stock is desperately trying to hold on to the long-term up trend. But the question remains, if the housing sector has been a bastion of strength in this economic downturn, why are their stocks starting to sell off. Next Wednesday's data might provide some clues.

Jeff Canavan
Assistant Analyst

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