Housing Recovery Stuck in Neutral

NEW YORK (TheStreet) -- The PHLX Housing Sector Index, or HGX, includes 19 stocks, of which 11 are homebuilders. On Monday, in Trading 12 Homebuilders With Mixed Earnings and Housing Data, I provided the most current data and analysis of the homebuilder stocks. All 12 had gains since my prior post of Dec. 19, Homebuilders Rebound on Single-Family Starts.

Today, I profile the eight stocks in the housing sector index that are not homebuilders. Five have traded lower for the year to date.

They are led by Masco (MAS), down 8.9%, followed by Weyerhaeuser (WY), down 7.9% and then Owens Corning (OC), down 7.5%. To me this is evidence the housing recovery has stalled at 60% of potential.

The National Association on Home Builders Housing Market Index came in at 57 in January, just above the neutral 50 reading. Single-family starts remain declined to an annual rate of 667,000 in December, which is about 60% of the more normal 1,000,000 to 1,200,000 annualized unit range.

The weekly chart of the housing sector index (195.63) has essentially been trading between its 50% Fibonacci retracement level at 173.80 and its 61.8% retracement at 202.05 for about a year now. This also suggests to me that the housing market is performing at 60% of its potential. The weekly chart will shift to negative with a close this week below its five-week modified moving average at 196.06.

Courtesy of MetaStock Xenith

Armstrong World (AWI) ($54.57 vs. $57.61 on Dec. 31, down 5.3%) reports quarterly results on Feb. 24 and analysts expect the company to earn 41 cents a share. The provider of flooring, ceilings and cabinets set an all-time intraday high at $61.63 on Jan. 16, then declined to $53.74 on Feb. 3 between its 200-day simple moving average at $52.55 and its 50-day SMA at $56.16. The weekly chart is negative with its five-week modified moving average at $56.73 and its 200-week SMA at $46.39. Armstrong has a hold rating and is 1% overvalued with a loss of 1.1% over the last 12 months. My monthly pivot is $54.03 with a semiannual pivot at $55.63 and quarterly risky level at $60.33.

Fidelity National Financial (FNF) ($30.70 vs. $32.45 on Dec. 31, down 5.4%) reports quarterly results on Feb. 12 and analysts expect the company to earn 37 cents a share. The title insurance company set an all-time intraday high at $33.80 on Dec. 26, then traded as low as $29.65 on Jan. 29 well above its 200-day SMA at $26.75. The weekly chart is neutral with its five-week MMA at $30.78 and its 200-week SMA at $19.44. Fidelity National has a hold rating and is 29.2% overvalued with a gain of 21.4% over the last 12 months. My semiannual value levels are $28.73 and $24.44 with a monthly pivot at $29.55 and quarterly risky level at $33.57.

Lennox International (LII) ($84.48 vs. $85.08 on Dec. 31, down 0.7%) reported quarterly results premarket on Feb. 5 and beat analysts' estimates by 4 cents, earning 77 cents a share. The provider of heating and air conditioning systems opened higher but drifted back to its 50-day SMA at $84.40 well above its 200-day SMA at $73.56. The weekly chart is positive but overbought with its five-week MMA at $84.94 and its 200-week SMA at $50.78 and the chart looks like an inflated parabolic bubble. Lennox has a hold rating and is 12.1% overvalued with a gain of 43.7% over the last 12 months. Semiannual and annual value levels are $71.96, $68.66, $71.14 and $66.36 with quarterly and monthly risky levels at $90.97 and $91.32.

Masco ($20.74 vs. $22.77 on Dec. 31, down 8.9%) reports quarterly results on Feb. 10 and analysts expect the company to earn 17 cents a share. The provider of home improvement and building products traded to a multiyear intraday high at $23.60 then declined to $20.60 on Feb. 5 just below its 200-day SMA at $20.92. The weekly chart is negative with the five-week MMA at $21.75 and its 200-week SMA at $14.76. Masco has a hold rating and is 10.4% undervalued with a gain of 12.9% over the last 12 months. Semiannual value levels are $19.87 and $17.63 with a monthly pivot at $20.95 and quarterly risky level at $26.30.

Owens Corning ($37.65 vs. $40.72 on Dec. 31, down 7.5%) reports quarterly results on Feb. 12 and analysts expect the company to earn 28 cents a share. The provider of insulation, roofing and sliding traded to a 2014 high at $42.95 then declined to $36.80 on Feb. 3 below its 200-day SMA at $39.66. The weekly chart is negative with its five-week MMA at $39.14 and its 200-week SMA at $33.82. Owens has a hold rating and is 5.1% overvalued with a loss of 9.3% over the last 12 months. My monthly value level is $33.21 with semiannual and quarterly risky levels at $43.96 and $45.27.

Radian Group (RDN) ($15.19 vs. $14.12 on Dec. 31, up 7.6%) reported quarterly results premarket on Feb. 5 and matched analysts' estimates reporting a loss of 3 cents a share. The provider of private mortgage insurance traded slightly higher staying above its 200-day SMA at $13.56. The weekly chart is neutral with its five-week MMA at $14.82 and its 200-week SMA at $7.32. Radian has a sell rating and is 91.6% overvalued with a gain of 120.5% over the last 12 months. My semiannual value level is $11.58 with monthly and quarterly pivots at $15.10 and $16.01.

Vulcan Materials (VMC) ($60.19 vs $59.42 on Dec. 31, up 1.3%) reported quarterly results premarket this morning and beat EPS estimates by 11 cents earning 8 cents a share. The provider of asphalt, concrete and cement set a multiyear intraday high at $63.05 on Jan.28 and traded as low as $58.68 on Dec. 3 staying above its 200-day SMA at $53.21. The stock traded to a new high this morning at $65.40. The weekly chart is positive but overbought with its five-week MMA at $59.11 and its 200-week SMA at $44.82. Vulcan has a strong sell rating and is 23% overvalued with a gain of 6.8% over the last 12 months. Monthly and annual value levels are $54.86 and $53.54 with a quarterly pivot at $61.22 and an annual risky level at $68.53.

Weyerhaeuser ($29.07 vs $31.57 on Dec. 31, down 7.9%) reported quarterly results on Jan. 31 and matched analysts' estimates, earning 27 cents a share. The harvester of timber and real estate developer traded down to $28.84 on Feb. 5 below its 200-day SMA at $29.52. The weekly chart is negative with its five-week MMA at $30.24 and its 200-week SMA at $23.06. Weyerhaeuser has a hold rating and is 10.2% overvalued with a loss of 6.1% over the last 12 months. My semiannual value level is $24.69 with a monthly pivot at $29.02 and a quarterly risky level at $36.86.

At the time of publication the author held no positions in any of the stocks mentioned.

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This article represents the opinion of a contributor and not necessarily that of TheStreet or its editorial staff.

Richard Suttmeier is the chief market strategist at ValuEngine.com. He has been a professional in the U.S. Capital Markets since 1972, transferring his engineering skills to the trading and investment world.

Suttmeier has an engineering degree from Georgia Tech and a Master of Science degree from Brooklyn Poly. He began his career in the financial services industry in 1972 trading U.S. Treasury securities in the primary dealer community. He became the first long bond trader for Bache in 1978, and formed the Government Bond Department at LF Rothschild in 1981, helping establish that firm as a primary dealer in 1986. This experience gives him the insights to be an expert on monetary policy, which he features in his newsletters, and market commentary.

Suttmeier's industry licenses include, Series 7 and Registered Principal (Series 24). He has been the Chief Market Strategist for ValuEngine.com since 2008 and often appears on financial TV.

Click here for details on Suttmeier's "Buy and Trade" investment strategy.

Richard Suttmeier can be reached at RSuttmeier@Gmail.com

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