Outlook: The Select SectorHomebuilder SPDR (XHB) has come a long way in just a few short months.On Nov. 24, the sector was targeted by a negative cover story in Barron's,titled "Luxury Homes, Discount Prices." Furthermore, on Nov. 26, 2008,Moody's cut its ratings and outlook on D.R. Horton (DHI), KB Home(KBH), Pulte Homes (PHM), and Ryland Group (RYL). It would seem to usthat this period, especially the Moody's downgrade, marked a bottom forthe sector. Since Nov. 21, DHI is up 106%, KBH has added 46.6%, PHM isup 51.2%, and RYL has jumped 55.2%. Furthermore, Meritage Homes (MTH)has bested the SPX by a whopping 34% during the past 60 trading days --quite a feat, considering the negative news and heavy investorpessimism levied against the group. Contributing to this technicalstrength, the government continues to bolster lending to consumers,with particular focus on mortgages. However, Wall Street remainsbearish on the group, as Zacks reports that only 34% of the 515analyst rankings on the housing stocks are a "buy," compared to 54%"hold" ratings and 12% "sells." One concern for the group, however, isthat the XHB failed to overtake its 50-day and 80-day moving averageslast week, while relative-strength leader MTH was stymied at its160-day and 200-day moving averages. |