Lumber vs. Homebuilders: The Great Disconnect

Lumber and the Homebuilders ETF (XHB) traded, essentially, in the same directions from mid-2010 until October 2014 -- when Lumber suddenly took a nosedive down to major support at 240, while XHB broke out and rallied -- as shown on the following 5-Year Daily comparison chart.

At the moment, it looks as though that support level will be retested, once more. A drop and hold below 240 could very well be the catalyst that breaks XHB's slightly-sloping (tight) uptrend. And, a drop and hold below 220 could see a very quick, sizable plunge in XHB...possibly slicing through 34.00 down to retest major support around 28.00, or lower.

Lumber and Homebuilders ETF...two charts to monitor to see if the current spread between them continues to widen or shift.

* UPDATE -- Click this link to view an interesting read, dated September 17th, from Tom McClellan regarding New Home Sales vs Lumber...another correlation to monitor in the coming weeks and months.