InvestedCentral
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Homebuilders led the market lower several years ago. Homebuilders topped well before the general market and it was this relative weakness in the group that led to overall weakness in the consumer. We're of the mindset that the market is unlikely to make any meaningful, long lasting recovery until homebuilding stocks begin to lead the market on a relative basis. From the chart above, you can see that homebuilding stocks - on a relative basis - continue to perform in sideways fashion. Because we're seeing no leadership from the group and the recent downtrend simply confirms the bearish technical pattern already in place, we are holding out little hope for a significant rally in equities in the near-term. We're not trying to simplify things too much. Obviously, there are other very important segments of our economy that are capable of leading a market rally. However, we believe there is an overabundance of housing supply and until the market begins to see a light at the end of the tunnel in this pivotal sector, we're like to struggle.
