NEW YORK ( TheStreet) -- The housing market has been a bright spot for the U.S. economy over the past several quarters. This week we will learn whether or not Q4 earnings from four homebuilders are strong enough to support additional share price strength.
Pre-market this morning Dow component Caterpillar (CAT) ($95.58) reported that they earned $1.04 per share after an 87 cents a share charge against improper accounting relative to operations of a new unit in China. CAT thus beat the $1.68 EPS estimate.
CAT is well below its February 2012 high at $116.95 and is well above its July 2012 low at $78.25. The daily chart shows an overbought condition and the weekly chart is positive with the five-week modified moving average at $92.06. The stock has a buy rating with a quarterly value level at $92.77 with an annual pivot at $96.43 (tested pre-market) and annual risky level at $97.63 which was tested last week.
My benchmark for the homebuilder industry is the PHLX Housing Sector Index (HGX). The weekly chart for HGX (191.35) shows an overbought condition with the five-week MMA at 177.24. HGX is up 11.7% year to date and up 159.8% since its October 2011 low. The horizontal red lines shown on the chart are called Fibonacci retracement levels of the decline from the July 2005 high to the March 2009 low. The 38.2% retracement is support at 145.52 with the 61.8% retracement a resistance at 202.09. HGX is above the 50% retracement at 173.81.Chart Courtesy of Thomson/Reuters At www.ValuEngine.com we show that 61.7% of all stocks are overvalued, and as I explained Friday in