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).
The movement in the bond market has been throwing a few sectors around in the past few months. Today, I would like to highlight the ishares real estate ETF, IYR. You don’t have to look all that closely to see the tight correlation its had to the bond market (represented by TLT) over the past eight months. Keep an eye on that one. As goes TLT, so goes IYR.
Given the fact our forthcoming president is a real estate mogul, it’s amusing that the industry most vulnerable to a big price drop is, in fact, real estate (I’ve already witnessed it here in the Silicon Valley, where prices started slipping this summer).
Back on October 21st, before the election, I suggested SRS as a buy. It’s up about 13% in that very short amount of time, and I think there’s plenty more to come.
Want to see a financial instrument that’s been carving out a series of higher highs and higher lows later, and has enjoyed a 15% appreciation since early August? Believe it or not, it’s that poor old battered beast we haven’t spoken about in years, the double-bearish ETF SRS:
To be sure, SRS has been viciously destroyed for years now, having peaked on a split-adjusted basis at $16,408.77 (yes, I’m serious) and presently trading at a level 99.8% lower than that. All the same, as my post earlier today about softening Palo Alto house prices suggested, we may well be past the peak of this particular bubble.
For the longest time, I got emails from Zillow telling me, month after month, how my house was appreciating in value here in my beloved Palo Alto.
Recently, though, there’s been a bit of a change:
The funny thing is that the amount it has decreased in value – about $540,000 – is precisely what I paid for the entire house way back when I originally bought it.
Has Palo Alto finally peaked? I think so.