Homebuilders ETFs Still Contending With Tepid Data

The S&P 500 continues to flirt with new all-time highs, but that is not doing much to boost the fortunes of homebuilders stocks and exchange traded funds.

After tumbling Thursday, the iShares U.S. Home Construction ETF (NYSEArca: ITB) and the SPDR S&P Homebuilders ETF (NYSEArca: XHB) are down 5% and 6.1%, respectively, this year. Thursday’s decline for ITB has the ETF struggling to stay above its 200-day moving average.

“Whenever there is a shakeout below a major support level, we like to see the price action recover back above that level and hold within a few days,” notes Deron Wagner of Morpheus Trading Group. “When we find ourselves in a position where there was a nasty shakeout candle, the price action should recover fairly quickly (within a few days to a week, not 2-3 weeks later). If the price does not recover quickly, chances are it is not a shakeout and the pattern may need a few more weeks of base building.”

While the technical situation for ITB is unresolved at best, it and the rival XHB face a bout with tepid fundamentals.

On Thursday, the Commerce Department said that sales of new, single-family homes plunged 8.1% last month to a seasonally adjusted annual rate of 406,000 units. That was the biggest decline since July 2013 and “May’s sales pace was revised to 442,000 units from the previously reported 504,000 units,” reports Fox Business.

XHB is an equal-weight ETF and while it does hold shares of homebuilders, it also mixes in derivatives plays like USG (NYSE: USG), Lumber Liquidators (NYSE: LL), Whirlpool (NYSE: WHR) and Pier One (NYSE: PIR). That provides the ETF some exposure to the retail side of residential real estate, making the fund a discretionary play as well. [Homebuilders ETFs Look for Upside]