The iShares US Home Construction (NYSEArca: ITB) has fallen more than 20% from its May peak with rising mortgage rates and worries about the strength of the housing recovery weighing on the sector.
Also, new mortgage applications are “falling like a rock of late” as interest rates move sharply higher, notes Kimble Charting Solutions.
ITB is in a bear market after the ETF’s 20% decline. The last three times this happened, the fund lost an average of nearly 8% the next month, according to Ryan Detrick, senior technical strategist at Schaeffer’s Investment Research. [Homebuilder ETF Trading Volume Surges: Oversold Bounce?]
SPDR S&P Homebuilders (NYSEArca: XHB) is another ETF that invests in housing stocks. Both ETFs have seen trading volume and volatility increase the past week.
The funds could see more activity this week. On Wednesday, investors will get a report on existing home sales, followed by the minutes of the last Federal Reserve meeting. Also, a report on July new home sales crosses Friday.
iShares US Home Construction
Chart source: Ryan Detrick.
Chart source: Kimble Charting Solutions.
Full disclosure: Tom Lydon’s clients own XHB.
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