New Home Sales Buoys The Boat Named ITB

The number of new single-family homes sold in April surprised to the upside. The equity market was already on an upswing but this piece of good propelled it even more.
US New Homes Sales - April 2016 US New Homes Sales YoY - April 2016
The trend of the annualized new home sales data is showing an up-trend. The year-over-year change healthy. This bodes well for the economy in general and home builders in particular. ITB – iShares U.S. Home Construction ETF – shows this quite well.

The ETF was underperforming the SPY till early 2016 when it started to take the lead. It is still doing better the SPY. Like the market, it is also approaching a resistance level. Its 14-period RSI has not yet reached the overbought region so it probably has more room to run.

ITB vs. SPYTomorrow’s Important Economic Release

At 4:00 AM (EST), German Ifo Business Climate report will be released. It is a survey of manufacturers, builders, wholesalers, and retailers and has correlation with economic conditions in Germany and Europe. Its impact is more pronounced for the currency – euro with major currencies – but it also affects the market sentiment, which may impact the equity markets. Here is how the index is shaping up.
German Ifo Business Climate

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