While the S&P 500 continues to try and find a firm footing that would hopefully set the stage for a meaningful rally, two sectors which led the broader market lower have been showing much healthier signs of stability. As shown in the chart below, while the S&P 500 (red line) was trending higher all throughout the second and third quarter of 2018. both homebuilders (brown line) and emerging markets (blue line) were forming steady downtrends.
Ever since late October, though, when the S&P 500 saw its first leg lower, both emerging markets and homebuilders stopped going down and have been trading in sideways patterns while the S&P 500 traded to new lows right before Christmas. While neither emerging markets or homebuilders have managed to rally back enough to make higher highs, homebuilders are getting close. Needless to say, if this group, which was the first to falter in 2018 can manage to turn things around, the prospects for the broader market would become a lot brighter as well.