Many economists and housing experts remain bullish on the market, but the charts of some of the housing companies are turning lower.
This first chart of Lennar (LEN), above, shows trading largely confined to a $45 to $56 range for much of the last 12 months. The On-Balance-Volume (OBV) line is flat to declining, and the slope of the 50-day simple moving average is negative. A move below $48 for LEN will make the chart look more bearish and remaining longs should be sold.
This chart of LEN, above, shows a four-year rally from the late 2011 lows. Prices have had a significant markup and are now trading on top of the 40-week moving average. The Moving Average Convergence Divergence (MACD) oscillator is bearish, and the overall volume of trading in LEN has been declining the past two years. Rising prices and declining volume suggest an erosion of confidence in the rally.
PulteGroup (PHM) has been moving irregularly lower since February (see the chart above). The OBV line has rolled over with prices the last four months. The MACD oscillator is negative and below the zero line. Prices of PHM are below the declining 50-day moving average, which paints a weakening picture.
In this longer-term view of PHM, we can see a potential three-year top formation. A break below $18 weakens the picture, and a close below $15 could open the way for a deeper decline.