We warned recently that the most highly correlated commodity to economic data was flashing red [2], but today we note that Lumber and Homebuilders are diverging in a dreadfully deja-vu-ic manner (just as they did in 2005, marking the top). While the relationship is 'loose' it seldom diverges for long...
So what are homebuilders making homes out of now?
As NewEdge's Brad Wishak notes,
Lumber is testing the uptrend line from the '09 lows here...
; and curiously, the HOMEBUILDERS ETF XHB is trying to break to new highs at the same time...
while the relationship is definitely loose but it rarely trends in opposite directions for long.
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