SIACharts Logo

Commentary >

iShares MSCI Germany Index ETF (EWG) & iShares US Home Construction ETF (ITB)

It has been a grind of a week for world markets. Although soft seasonality and ongoing worries about the state of the US banking sector continue to have an impact, positive earnings reports (especially from Apple), and positive economic news in the form of stronger than expected employment growth and weaker than expected inflation growth helped to shore up investor support.

Overall, despite back-and-forth trading within and between days, North American indices have managed to trade flat to up 1.0%. International Equity markets also continue to do well, particularly in Europe and Japan. Asia Pacific markets continue to struggle, particularly Taiwan.

With earnings season now moving into its later stages, for the coming week, the focus of business news turns to real estate, with several housing market price and activity related stats on the way, and the retailing sector, with US retail sales coming out Tuesday and US retailer earnings getting underway. Headliners next week include: Home Depot on Tuesday, TJX on Wednesday, and Walmart on Thursday.

The price of oil has rebounded this week, which has also helped to support Energy stocks. Other top rebounding sectors this week include Computer Software/Hardware, Metals & Mining, Internet, Automotive and Utilities. Sectors that struggled include Consumer Staples, Tobacco, Chemicals and Media.

In this edition of Equity Leaders Weekly, we look at continued strength in International Equity markets and at the significance of recent gains by US homebuilders.

iShares MSCI Germany Index ETF (EWG)

The US homebuilding sector, which is tied to one of the largest discretionary purchases people make in their lifetimes, and a major employer, can be seen by investors as a bellweather group which is sensitive to interest rates and the strength of the economy.As interest rates soared in 2022, the iShares US Home Construction ETF (ITB) spent most of the year under pressure. Since bottoming out in October, however, ITB has been increasingly recovering. Moving into May, ITB has launched into a new upleg, resolving a symmetrical triangle with an upside breakout, and completing bullish Double Top and Spread Double Top patterns.Driving this recovery has been a growing sense that the Fed is likely nearing the end of its interest rate hiking program, particularly with the Fed Funds rate now above the Consumer Price Index, and with cracks emerging in the banking sector. In addition, ITB has responded favorably to signs of resilience in the economy a year into monetary tightening including stronger than expected construction spending, employment growth and corporate earnings reports.

Last June, a selloff was contained by a long-term uptrend support line and since then, ITB has been working its way back upward. In November, ITB snapped out of a downtrend and its recovery has accelerated since then. A March correction was moderate and this month, ITB has broken out to the upside once again, completing a bullish Double Top pattern and a Bullish Catapult.

Next potential upside resistance appears at the previous peak near $82.15, followed by 94.35 based on a horizontal count. Initial support appears near $70.10 based on a common 3-box reversal.

Keep up to date on the latest financial market news.

Receive a daily newsletter with stock highlights, ETF rankings, weekly market focus and others.