A key index of housing stocks is hitting several layers of overhead resistance.
We’ve noted over the past few weeks that the post-February stock rally has brought many of the major indices into areas of significant resistance on their charts. The same goes for some of the sector averages. Included among them, in our view, is the PHLX Housing Index, or HGX. The impressive list of factors posing as potential resistance nearby on the HGX chart includes:
- The broken post-2011 Up trendline
- The 200-Day Simple Moving Average
- The 61.8% Fibonacci Retracement of the August-February decline
- The breakdown gap emanating from the December 31, 2015 close
Here is a close-up shot at the multiple resistance layers:
We will say the pace of the recovery in the HGX has been impressive, up some 25% from its February basement levels. However, the move has produced a very overbought status in the index in the short-term, just as it has reached this critical confluence of resistance levels. That should make for tough sledding in the near-term, regardless of the fate of the index in the longer-term.
That said, thanks to another central bank kick-save, this time from Fed Chair Janet Yellen, a host of indices including the HGX made a late-day run at hurdling key resistance today. The jury is still out on which, if any, were successful in overcoming their potential resistance. Furthermore, they will have to sustain their position above such levels in order to claim victory. However, after having been temporarily halted precisely at suspected resistance over the past week, and appearing vulnerable to further weakness, today’s move certainly brightens the picture a bit.
In the case of the HGX, despite today’s move, a clear-cut breakout above resistance is far from a done deal. In other words, this one is still listed as contingent as the housing sector still has work to do before it gets its “clear to close”.
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