This morning’s Daily Post brings with it, as always, dozens of colorful real estate ads. In one case, they’ve given up even trying to pretend the prices are sane……….
I’m noticing a terribly-interesting breakdown happening place in real estate, encapsulated nicely with the sector fund shown below. Take note of how the long-term trendline is already broken, and as I’ve shown in the inset, we’ve got a nice little breakdown taking place on a short-term basis as well.
The good people of my fair city are getting slack-jawed over real estate. Even with interest rates rising (should SHOULD diminish any asset that depends so heavily on debt), prices just keep getting crazier. Right on the front page this morning is a 900 square foot shack in a crappy part of town that sold for two and a half million bucks, way over the asking price.
Since apparently our northern neighbor didn’t learn anything from the folly of the U.S. between 2002 and 2006, they have engaged in their own nutty real estate mania. Countless seminars and get-rich-quick schemes are cluttering the landscape, and I think we all know how this movie is going to end. For myself, I’ve taken to shorting those with a financial interest in this bubble, and my best winner so far is the Bank of Montreal.
Before I get into the Trade Idea, I’m going to review the context of the S&P500 from a structural standpoint and a typical deviation standpoint. First of all, structurally, the Weekly and Daily charts show higher highs and higher lows, the very definition of an uptrend. In November of 2016, the SPY completed a $20 wide trading channel of which currently price is a stone’s throw from its high resistance. The channel would suggest that buying potential is limited.
Now, anyone who hangs around the comments has seen that I use 5% simple moving average envelopes around a 100MA as a measure of movement potential (oversold, neutral, overbought). Where are we now? Yep, hit it on Friday. Again. (Click on any chart to see a larger version).