KBH, KB Home and XHB ETF

kbh feb 9 2013kbh feb 9 2013 s

Looking at the big picture it is not all that hard to assume that the bear market in the home builders stocks is over and that there are only blue skies ahead. Perhaps. Perhaps not. Looking at the more detailed chart it is very difficult to escape the notion that this is a diagonal, read wedge. These ONLY occur in 5th or C waves. They should retrace entirely to their base and beyond, so below $5. This diagonal is an absolute beauty in all respects. It has the brief overlap, the throw-over and it is well proportioned. Consequently we would expect a drop of at least $6 first and then we shall see what prevails. Do not buy and do put in a stop-loss!

The home-builder index etf supports this analysis. We thought this was a sell at about $26 back in Sept. As usual it went a little further but now sports a distinctly negative pattern.

xhb feb 9 2013