This Housing ETF Will Be Lucky if it ONLY Loses 7%

iShares US Home Construction ETF (ITB – NYSE)

Tuesday, August 27, 2013

The perfect definition of a doomed bubble is when good news isn’t good enough anymore.

S&P/Case-Shiller’s Home Price Index data for June is out, and the headline 20-city composite index rose 12.07% year over year.

A few years back, we would have been breaking out the champagne over stats like that. But today, it just represents a slowdown from May’s 12.20% growth.

And, on the new-home front, July sales were expected to sag -2%. But instead, it fell off a 13% cliff!

All of this is the result of rising mortgage rates, which in turn, takes their cue from US Treasury Bond interest rates. And T-Bill rates will spike even higher if Republican conservatives try to shut down the government in October over Obamacare funding.

ITB 082713

Bottarelli Research Tip: We’ve already asked Bottarelli Research LEAPS readers to buy puts against the iShares US Home Construction ETF (ITB – NYSE) looking for our usual 25% to 50% gains. But housing is too important to the economy — and this chart is just too ugly to sit on! Over the past six months, the ITB has generated a Head & Shoulders Top, A 3x Sell Signal Stack, and a Death Cross. And now, volume is returning, but it’s all selling pressure. The next technical support level is the 38.2% retracement marker at $19.32. That’s a -7.1% net drop from current prices, but the ETF will be lucky if the bleeding stops there. The H&S signal indicates $17.17 (-17%!) as a more likely target. Trade accordingly.

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