Tough Defense Wins

After a sharp rally into late-June many folks became quite bullish on the prospects for the homebuilders, seen on the XHB ETF daily chart, first below. The homebuilders seemed to defy stagnation in the national housing market, while also giving ammunition to those arguing we have a shortage of inventory on a national level and thus need the homebuilding stocks to thrive. However, since then the XHB dipped and is currently losing its 200-day moving average (yellow line) as we speak. 

But at the risk of cherry-picking the "homies," we also have ongoing weakness is retail stocks adjacent to the housing sector.

The "big three" housing-adjacent retails stocks we have noted for Members are Home Depot, Lowe's and Sherwin-Williams. On the second daily chart, below, you can see Home Depot repeatedly failing 200-day moving average tests from the underside, a master class in bears playing tough defense in this relief rally since May. 

In addition, we previously noted the likes of Costco and Walmart (the latter on the third daily chart, below) continuing to sputter. Again, while not direct housing stocks, this action is consistent with 90% of the country struggling amid a stagnant housing market. 

Above all else, what we seem to have here is a strong circumstantial evidence case that the overwhelming majority of Americans are facing recession-like conditions even though the wealthiest Americans are enjoying the wealth effect from parabolic senior indices and heavyweight market cap monsters. Bifurcation is playing out in both markets and the real economy, which begs the question what happens if and when the Nasdaq sputters in its own right beyond a mere garden-variety dip.