Home Builders Could Drop 15%

Ajouté : 2026-05-31

[00:00:01][music] [music] >> Good afternoon and welcome to the TheoTrade afternoon video. I am Blake Young. Today is May 28th, 2026 and we're going to talk about bonds, home builders, and health care today.

[00:00:23]Starting out with SPY, S&P futures and S&P 500 ETF reached new highs, trading all the way up into this overbought zone, at least for a minute in the SPY.

[00:00:34]Now, that does not tell us to immediately start looking to go short because we know technology is lifting this a little bit more than the rest of the other sectors as we're about half and half. Half the sectors are positive and half the sectors are negative. But, there's an interesting story in the response because we were trying to sell off. We saw some bearishness and then we got the tweet or the alert that we are going to do a 60-day peace deal or ceasefire until we get approval on the new deal from Iran. Now, I'm still waiting for the other shoe to drop. I'm still waiting to see if Iran's going to actually say, "Yeah, we are in agreement and we're just waiting for approval."

[00:01:11]But, that's still to be seen, I think.

[00:01:13]Now, if we look at this and say, "Okay, bullish market, bullish market, bullish market." We would think that we'd see a lot of growth across the board. Again, we're kind of mixed. If we go to the MarketWatch tab and you look at all the sectors, you can see there's your technology, Microsoft, Oracle, Nvidia, AMD, and Micron, Google. But, everywhere else is muted or red and not that great of moves. This is not a super bullish chart. This is not a super bullish map. And so, I'm looking at this and saying, "Okay, not necessarily super strong." If we look inside of specific sectors, I'm not going to chase those monsters. I'm going to chase the ones that are very positive. We look in health care, we can see life science tools and services were very strong today. That's not something that happens because of Iran. I want to see movement that is not driven by news or tweets. And if I can find that, I think that's where we're going to find the most stability. And you can see this entire sector and this entire industry inside the sector is doing extremely well. So, life sciences and tools and services extremely well, and we're going to come back to that.

[00:02:20]But before we go into those stocks, let's go back to the charts and let's pull up bonds. Now, bond prices you would expect to see movement if we had a higher likelihood of rate hikes or a lower likelihood of rate hikes, we would expect to see something. Now, what we ended up with today is a gap down slightly, a test of the lows, a recovery to a new high, and then closing back at the monkey bar. So, this is a widening or expansion candle. I always like to call them pirate flags. And as we're sitting here, we're failing at the zero.

[00:02:55]This feels, looks, and smells like a failure to break, a failure to break, and likely a return back down to fair price at 109, possibly down to 108.24, and a return to new highs in yields. And that means TNX should be looking as a bounce off of support. So, let's go take a look at TNX.

[00:03:19]And if we look here, we've pulled back, which looks like it could be breaking out. But if we do not close below 44.61, I will call that a failed break down. And if it's a failed break down, it gives us equal odds up or down, and then we might be looking for return to 45.7, 46.5, which is returning back towards near annual highs in 10-year Treasury yield. That's going to have the biggest impact to stocks that are in home builders and borrowing. And we know that consumers are at a multi-decade of default when it comes down to credit cards and other non-secured loans. So, as we're looking at this, higher rates, higher rates, higher rates are going to put more pressure on the consumer and likely be a struggle for home builders. Now, I thought we were going to get a bearish signal today. We closed in and we were going to close out. We've recovered up here. I'm going to wait for ITB to close below 9248 to give us a target back to 88, possibly all the way down to 80. If we can get that, we're talking about maybe a 14-15% drop in home builders.

[00:04:27]But, the individual stocks look very promising for bearish trades. You know, I always like to go to Toll Brothers because their financials are more evident of what we're looking for. Close in or on, failure to break, this is a bearish trade signal on Toll Brothers.

[00:04:42]But, more importantly, look at the fundamentals. I'm going to go to the analyze tab and then we'll go back to the the uh healthcare.

[00:04:49]But, I want you to notice two very specific things with Toll Brothers.

[00:04:52]Well, there's really three, but two specific things I want to highlight.

[00:04:56]Number one, is they are making less in net profit margin. We stepped down. So, this year they're making less, down by 15%. So, if their margins were 12%, 13%, they're now making 11% and that's a 15% decline. And you can see that their margins peaked and dropped back down. So, this is the lowest level in 4 years and we're in decline. Secondly, it's taking them longer to return over their inventory, their homes. It's one of the worst levels of turnover that they've had in the last 5 years. Those are the main things to pay attention to and the fact that they have to sell homes even if it's at a discount or even if it's less margin, otherwise they can't meet their bills and obligations when we look at the quick ratio. So, I do think home builders are still struggling. I think you will see lower highs, lower lows. I think you will probably see another opportunity to trade this back down to new annual lows, but it's just a matter of timing. Toll Brothers looks like it's there. ITB does not. If we go back to the life science companies, you can see Danaher gave you a buy signal here, a buy signal here, and today it's a Bollinger Band breakout. So, I'm looking for Danaher to go an additional 15 points higher, if not more than that. 15 points higher on top of 181 today would bring you up to 196. 196 will break you through here and bring you up to about 197, 198. We'll call it 198. So, I do think you have a good shot of getting to 198, just shy of 10%. And today it was 4.59%.

[00:06:29]So, it shouldn't be too difficult to do.

[00:06:31]But I really would like to see this turn over and cross over the zero line as far as accumulation, but we had bullish divergence, bullish divergence, and a breakout of the market forecast, breakout of the monkey bars, breakout of the Bollinger Bands. And I do think that we can get up to that 198 in probably the next 2 weeks.

[00:06:50]Now, I like this move in Danaher. I like the move that we saw in Thermal Fisher, but Thermal Fisher feels like we're we'd be chasing it a little bit. So, let's go take a look at there at TMO.

[00:07:02]And if we're looking at TMO for its breakout, it's a little bit more expensive stock, great basing pattern, huge move. And I would have loved to pick this one up, but that move is a 7 and 1/2% move. Does that mean we fill this gap? Probably. I think that we are set up for that gap to be filled. It looks like a big move. We're talking about a move up to the close price of about we'll call it $25. That's only that's shy of just about 5% move. Okay, so we're looking about a 5% move just to get up to this level. But if it can close past there, it's going to clear out all of this. We really could see 545 or 600.

[00:07:42]Again, everything's signaling to be a buy. Buy signal here, buy signal here, buy signal here. The only concern I have is the ceiling at 497 and the gap.

[00:07:51]And we already went 7%. We might get a pullback before we get a run.

[00:07:57]And the options really are not lending us to sell the put with enough space.

[00:08:03]You could have that sell the put at 480.

[00:08:06]You'd get 2.68% return on risk. And it's giving you about a 5% safety net. But considering today went 7%, I don't feel super comfortable with that setup. But I do like the move.

[00:08:18]And I think likely much of this move is going on because of what we saw with Agilent. Agilent jumped up 20% after earnings. Earnings as you can see here, let me get zoomed in.

[00:08:29]As you can see here, after Come on. There we go. After earnings, we beat by 9 cents. Not a huge beat, but apparently the market didn't expect that. Because this is a monstrous monstrous move. We don't chase these, but it does tell us that they're expecting more and more and more in this space, in this industry.

[00:08:48]So, keeping to the life sciences tools and services might be the way to go.

[00:08:52]But it was interesting to see the lift here help with the health care equipment and supplies like ISRG.

[00:09:00]ISRG's up 1.24%, which is not a lot. And more importantly, ISRG is at and near an annual low. So, if I'm looking for opportunities that maybe ISRG is done falling, this might be one of the last ones I will look for. ISRG, you can see you can sell the put on ISRG at 415 for 2.8%.

[00:09:23]Similarly giving you that defense. And I'm okay with a 5 and 6 and 7% margin of safety on a stock like ISRG when it didn't move 7 and 8%. So, if I sold the 415 and got paid 2.8% the stock price would have to fall at least $8 to get back to the assignment and then an additional $11 below here. And so, we're talking about going all the way down to 405, a little bit lower than 405, about 40350.

[00:09:54]So, if we look at the chart, 40350 and look where we just based out. We based out at 414. We're closing up. If this stabilizes, selling a put here would be a way to buy into this at the lows at a discount where your break even is going to be all the way down below that breakout in the move down. Now, this one's not signaling yet. It's just using the other charts in the life sciences area to bet on others in other investments in other industries inside of healthcare sector.

[00:10:27]And I think that's a way to participate in healthcare breaking through this high creating a double bottom and still having a lot of lift potentially up to 157 if we don't want to trade the healthcare sector itself.

[00:10:40]Well, that's going to do it for me today. Thank you for watching and join us tomorrow in the live trading rooms. Otherwise, I will talk to you again next