#3 Technical Analysis: Homebuilding vs Real Estate: the Divergence No One’s Talking About

Here you’ll find:

1. How Homebuilder and Real Estate sectors diverged since the yield curve inversion, relative to the S&P 500 Equal Weight
2. The evolution of U.S. housing starts over the same period
3. Market data showing the imbalance between supply, demand, and existing inventory
4. Sector statistics highlighting the companies with the sharpest capital outflows
5. Technical snapshots of several sector names at different stages: FOR, JHX, OC, TOL, TPH, and LPX

From the big picture to the details: How Homebuilders (here for more details) and Real Estate (here for more details) are evolving against the S&P 500 Equal Weight.

The market is currently pricing these probabilities into rate cuts. Check it out here

Starting point: July 2022 — the moment when the yield curve inverted and the economy entered a new stage of the cycle.

• Ratios between Homebuilders, Real Estate, and Financial sectors, with the S&P 500 Equal Weight as the denominator
• The red dotted line shows the evolution of U.S. housing starts since that date

It’s clear that the Real Estate sector shows the greatest weakness — likely already priced in — while Home Builders have gained 27% relative to the S&P 500 Equal Weight.

In a context where:

• Housing construction is falling
• 113K new units enter the market each month on top of an existing 490K inventory
• Only 48K units are sold monthly
• 1.3M units more are still in the production pipeline

Homebuilding: The most extreme weekly moves within the sector

Looking at the Z-scores of capital flows, returns, and volume, it’s clear how exceptional this move is compared to its own history.

Technical Analysis: Choosing Vehicle inside the Homebuilding Sector

A few snapshots of the trades we’ve been watching.Technical setups vary widely depending on each company’s niche.

It’s a solid starting point, aligned with the macro backdrop — Texas is one of the states with the largest inventory buildup

This risk/reward doesn’t fit our strategy

So close — four days behind the move. The challenge now is finding where to jump into a move that’s already underway. That’s where the Fibo levels come in.

Sexy P/L. on this one we went deep.

As you’ll see, there are trades here for different methods and trading systems. None of them are random — we reviewed 15 to 20 similar setups before selecting these.

The views you see here are just that — our opinions, based on our own trading approach. There are many paths on the Lord’s road… I imagine you’ll find yours.

That’s all for today, gentlemen. Plenty of work ahead. I hope this adds value — and as I always clarify, this is our actual work, shared here for marketing purposes.

Martin