It's a Concern

Not At The Party

Author

Larry Thompson
June 21, 2025

It’s a Concern

We’re in a bull market.
The majority of stocks are going up. But not everyone’s made it to the party.

Homebuilders have been struggling this year - plain and simple.
And that’s a concern.

It’s only one piece of the puzzle, but it’s a big one.
Housing drives a ton of economic activity in the U.S.

Homebuilders usually move with the broader market and often function like an economic barometer right alongside semiconductors.


When all cylinders are firing, these two tend to move in sync.

And earlier this year? Homebuilders actually gave us a warning.
They rolled over in February, before the S&P corrected.

That’s why I treat them like an internal “economic indicator.”
When they’re underperforming, it doesn’t give me the warm-and-fuzzies.

They don’t need to lead… but they need to show up.

Between $SPY ( ▼ 0.24% ) (S&P 500), $SMH ( ▼ 0.88% ) (Semiconductors), $XHB ( ▲ 1.66% ) (Homebuilders), and $ITB ( ▲ 2.16% ) (Home Construction).

The conclusion jumps off the screen:

  • Semiconductors and S&P 500 are pushing back toward highs.

  • Homebuilders and construction? Sitting near year-to-date lows.

That’s not what strength looks like.

In a healthy bull market, you expect economically sensitive groups like homebuilders to at least be trying to keep up.

Instead, they’ve completely lost altitude.

Dig In At The Divergence?

This is where things get interesting.

IF there was a time for the Homies to dig in - it seems like it’s come.

Price made a lower low earlier this year, but RSI printed a higher low.

That’s a classic momentum divergence.

But here’s the catch, divergence is only a setup, not a trigger.

And we haven’t seen any upside confirmation.

Instead, price is sitting deadweight right at prior support, doing a whole lot of nothing.

That’s the definition of dead money.

The Bigger Picture

This isn’t just about one ETF. Homebuilders are a cyclical leadership group.

They matter. When they participate, it often signals confidence in the economic backdrop, in interest rate stability, and in the consumer.

So what does it say when they lag this badly in a broad market advance?

  • Maybe the rate cuts aren’t coming fast enough.

  • Maybe demand is stalling.

  • Maybe it’s just rotation.

But if they do start showing signs of life?
That adds fuel to the bull case.

If they keep rolling over while the rest of the market grinds higher?
It gets harder to trust that new highs will keep sticking.

Cheers,

Larry Thompson, CMT CPA