Real Estate Seems To Be A Problem
- Posted by JC Parets
- on November 15th, 2012
For the last couple of weeks, we’ve seen some pretty serious deterioration across the real estate space. And when I say real estate, I don’t mean new housing starts or new home sales or any of these other useless (for me) data points that we can’t turn into a trade. Last week, we pointed to the false breakout and momentum divergences in Homebuilders. And since then, the selling has picked up.
Unless one lives in a cave, most everyone knows Real Estate had a good deal to do with the economic and stock market weakness in 2007 & 2008. The DJ Home Construction index was a great “leading indicator” for the economy as it started turning lower back in 2005.
From 2008 to present, the Home Construction Index and IYR have reflected a ton of relative strength as they have gained over twice what the 500 index has off the 2009 lows.
Of late both of these Real Estate based tools above, hit a key Fibonacci resistance level while creating bearish rising wedges. At (A) in the above chart, both are breaking below support. For the first time in a long time, both of these reflected relative weakness yesterday, losing almost twice what the broad market, even though the Dow was down almost 200 points. One day does not make a trend, yet this weakness should be respected a ton!
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J.C. Parets is the Founder & President of Eagle Bay Capital, LLC. He earned the Chartered Market Technician designation (CMT) and is a member of the Market Technicians Association. More
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