Propy already trying to trigger bigger invh&s pattern? Prop has technically already completed a right shoulder and currently has a decent sized green candle above the neckline. That shoulder is extremely small and disproportional to the rest of the inverse head and shoulder pattern, but I’ve seen even uglier looking versions of this pattern get validated so it is quite possible we could see it validate on the current breach above the neckline. What I’ve also seen many times is price action going back below the neckline 1-4 more time before the official breakout validation happens. Either way once the first breach happens it’s always wise to start keeping a close eye on an inv h&s patter. The breakout target for this one is pretty massive, around $42 or so, so I plan on trying to add some more propy to my holdings before the validation is confirmed. *not financial advice*
Realestate
Long S&P and Short Real Estate on Higher for Longer Rates“The only bad time to buy real estate is later” cites investment wisdom. But, when interest rates soar high, real estate investments can and do hurt.
Last week FOMC reiterated its resolve to fight inflation down to its target 2%. Inflation has been stubborn and sticky. It has shown signs of trend reversal towards resurgence. Chair Powell’s made clear that rate cuts may take longer to arrive than anticipated.
Elevated rates are restrictive for businesses. It leads to shrinking sales and profits. However, recent earnings show heavyweights posting robust growth. While others have shown disappointing earnings. The difference boils down to the industry and sector.
Some sectors fare worse than others. Real Estate is extremely sensitive to rates. Higher rates directly impact mortgages impeding buyers from getting into long-term mortgages.
Unsurprisingly, the Real Estate Select Sector index has been the lowest performing sector since the start of the Fed’s rate hiking campaign. Underperformance has continued well into 2024 and has also been observed during periods of market rallies.
With sustained headwinds facing real estate, underperformance is likely to continue. This provides suave investors a tactical spread opportunity consisting of a long position in the wider S&P 500 index using CME Micro E-Mini S&P 500 futures and a short position in the CME S&P Real Estate Select Sector futures to harness a reward to risk ratio of 1.5x.
FED REAFFIRMS HIGHER FOR LONGER
Fed fund rates will remain at 5.25%-5.5% for longer given the stubborn inflation trend over the last 12- months.
Forget rate cuts. Those hopes are diminishing. The CME FedWatch signals just two rate cuts this year as of 5/May, down from six expected at the start of the year.
Source: CME FedWatch
Chair Powell’s speech hinted that even two rate cuts is overly hopeful stating that the expected inflation may not be enough to cut rates this year.
HIGHER RATES WEIGH ON REAL ESTATE SECTOR
Higher rates adversely impact the Real Estate sector. Elevated rates push up mortgage and financing costs. Large financing costs constrains demand.
Last October, the 30-year mortgage rate climbed to its highest level in 23 years at 7.79%. Following that peak, the mortgage rates eased to as low as 6.6% in December as expectations of rate cuts started to firm up.
Since then, the rates have rebounded. As of 29/April, the 30-Year mortgage rate average (calculated by Freddie Mac) hovers at 7.22%. A measure calculated by the Mortgage Bankers Association showed that as of 1/May, the mortgage rate continues to rise and is now at 7.29%.
Higher rates are forcing housing demand lower. New home sales have declined 5% and existing home sales have fallen by 25% since the rate hiking cycle.
Home prices continued to rise despite a slowdown in sales. House price index is almost 10% higher since 2022 as inventory of houses hovers near an all-time-low.
COMMERCIAL REAL ESTATE FACES IDIOSYNCRATIC RISKS
Commercial Real Estate (“CRE”) has been hit with a double whammy from dwindling office space demand and prohibitive cost of financing.
Office space vacancy rate reached a new record high of 19.8% in Q1 2024 as per Moody’s data reported on Bloomberg . Recovery in office space demand remains unlikely in the near term pressing CRE sector down.
HYPOTHETICAL TRADE SETUP
The real estate sector has been hammered. The S&P Real Estate Select Sector Index is 20% lower since the rate hiking cycle began. The benchmark S&P 500 declined at first but has since recovered and now stands 13% higher.
For investors to build a directional short is not prudent as the sector has suffered brutal markdowns. This paper argues in favor of a spread between S&P 500 and the Real Estate Select Sector Index using CME futures.
S&P 500/XLRE spread has delivered a stunning 45% outperformance since 2022.
Investors can utilize CME Micro E-Mini S&P 500 futures which provides exposure to USD 5 x S&P 500 Index. This is one-tenth the size of standard E-mini futures enabling granular risk management.
The CME Micro E-mini S&P 500 futures first launched exactly five years ago on 6/May/2019. The demand for these micro contracts has spiked. In April 2024 , these contracts witnessed an Average Daily Volume of more than one million contracts which represents 15.7% YoY growth and 22.7% MoM growth.
Micro futures allow for smaller position sizes. It broadens market access and allows for granular and effective hedging by matching notional values closely in spreads.
This hypothetical trade consists of a long position in 2 lots of Micro E-mini S&P 500 June futures (MESM2024) with a notional size of USD 51,615 (= 2 (number of contracts) x USD 5 (contract size) x 5161 (index value) ) and a short position in 1 E-mini Real Estate Select Sector futures (XARM4) with a notional size of USD 45,500 (= 1 (number of contracts) x USD 250 (contract size) x 182 (index value) ).
Consider the two scenarios which can lead to a shift in the spread ratio:
1) S&P 500 rises from 5161.5 to 5408.6 while Real Estate Select Sector index remains unchanged at 181.8. The ratio becomes 5408.6/181.8 = 29.75. The overall profit, which comes entirely from the S&P 500 position would be (5408.6 – 5161.5) x 5 x 2 = USD 2,471.
2) S&P 500 remains unchanged at 5161.5 while Real Estate Select Sector index falls from 181.8 to 173.5. The ratio becomes 5161.5/173.5 = 29.75. The overall profit, which comes entirely from the Real Estate Select Sector index would be (181.8 – 173.5) x 250 = USD 2,075.
• Entry: 28.5
• Target: 29.75
• Stop Loss: 27.5
• Profit at Target: USD 2,471
• Loss at Stop: USD 1,620
• Reward to Risk: 1.53x
MARKET DATA
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Propy’s Linear chart has a more realistic invh&s targetI posted my previous Propy chart on here before realizing I had the chart mode set to logarithmic. Log charts also do usually reach their targets as well but sometimes it can take multiple bull runs to hit the really high targets on a logarithmic chart. So I thought it would be wise to switch the chart to linear and show what the linear breakout target would be for the inverse head and shoulders target as it has a much higher probability of reaching this target within a month or few of it validating the inv h&s breakout. We can see the target for the pattern on the linear chart is considerably lower and only at $5.60 instead of the $42 price the log chart has the measured move target at. I can believe that propy could eventually hit $42 but theres no guarantee that happens this bull run, sometimes log chart targets take multiple bull runs to get reached. That being said, it is still very possible propy could reach such a price this bull run, so its wise to include that price target as a real possibility, but also even wiser to not consider it a certainty by any means(at least not for the current bullrun). For now I’m setting my pragmatic sights for the invh&s breakout target at around $5.60(depending on whenever the breakout is actually validated which could take many more dips back below the neckline first) *not financial advice*
ZILLOW, WILLOW WHEREOW THE PRICE GO? imma be honest, I'm running out of creative titles, so you get what you get.
Trends labeled
Price targets labeled.
really neat setup on zillow here.
These buy zones are marked at some major support, we have a short term trend leading to a top, and may have already hit. We have a long term support trend going in the bearish price direction.
All of the above can help determine potential price movements.
With RSI being overextended, the market as a whole, there is potential for quick downside right past support trend, into the zones of major price support, which will then create even stronger support, which will allow the price to keep climbing back up.
I'm hesitant to predict anything before seeing where it heads into earnings (13th labeled)
BUT..
IDK, something like this maybe?
Essentially, I don't know how it will look, or how steep it goes, but it's good to be prepared for some potential scenarios. This chart can cover quite a few of them if you're patient and wait for the right trade.
Overall, I would suggest being careful, and should the price go up before going down, it might be a better option to look for a short entry and ride the price down than jumping into a long position, especially with how this chart looks.
The RICS UK House Price Balance - Trending Up For Now The RICS UK House Price Balance
(Released this Thursday 14th Mar 2024 for Feb month)
The Royal Institute of Chartered Surveyors (RICS) House Price Balance is a monthly survey that indicates whether more or less surveyors expect housing prices to rise or fall in the U.K. housing market. A positive net balance suggests house price increases, while a negative net balance implies price decreases.
The RICS provides valuable insight into the UK housing markets trend and helps gauge the direction of house price movements whilst also offering insight into consumer spending.
The Chart
The RICS House Price Balance is calculated as the proportion of surveyors reporting a rise in housing prices minus the proportion reporting a fall in prices.
It reflects the expected monthly change in national house prices.
Positive vs. Negative Net Balance:
A positive net balance indicates that more surveyors expect price increases, signaling a robust housing market. A negative net balance implies that more surveyors anticipate housing price decreases, indicating a fragile housing market.
Green Area 🟢 = More Surveyors Reporting an Increase in House Prices
Red Area 🔴 = More Surveyors Reporting an decrease House Prices
Grey Areas ⚫️= Recessions
▫️ The RICS fell sharply from April 2022 down to the 0% level in Oct 2022. This was a leading indication of a downward trend UK House market prices (falling from 78% in Apr 2022 to 0% in Oct 2022).
▫️ The RICS fell into the red zone from Oct 2022 forward indicating that houses prices from this date were in net decline (per surveyors responses).
▫️ Almost 12 months later the RICS reached a low of -66% in Sept 2023. Since this date we have started to trend upwards sharply recovering from -66% to -18.4% today. However we remain in net negative territory indicating house prices are still in declining but not as much as before, a change of trend may forming indicating a move to house price appreciation (not confirmed until we move above the 0% level into + territory).
▫️ The Historic Recession Line on the chart illustrates the -63% level which crossed by the RICS at the onset of the 1990 and 2007 recessions (grey areas on chart). We recently penetrated this level moving to -66% in Sept 2023 which historically does not bode well.
This weeks RICS release will be very revealing and could tell us if we have a continuation of the upward trend for UK House prices or if we we remain firmly in negative territory.
Lets see what Thursday brings, a fascinating little metric to help us keep an eye on the property market in the UK and the to get an idea of UK consumer behavior.
PUKA
LL Flooring Revision: Back From The GraveBuilding your new home is exciting, especially when you understand how the process works. It’s understandable that buyers are excited to see their new home built from start to finish says Chip Perschino, senior vice president of construction at Edward Andrew Homes.
“Our homeowners enjoy watching the home come together, from pouring the foundation to framing and watching the home take shape,” he says. “Once the home has drywall, they start to visualize themselves living in the space and how they’ll use it — imagining what furniture goes where and how they’ll entertain friends and family there.
UPDATE: Vukile Properties set for upside in 2024Inv Head and Shoulders formed on Vukile as of my last update.
The progress has been slow but sure. It broke above the neckline, stayed above the uptrend and 200MA.
So the next target I'm raising even higher. But this time to R17.59
FUNDAMENTALS:
Positive Earnings Release:
Vukile Properties released their first half 2024 earnings showing an increase in earnings per share (EPS) compared to the first half of 2023.
An increase in EPS is typically a strong indicator of a company's profitability and can attract investors.
Dividend Guidance Revision:
The company revised its dividend guidance for the year ending 31 March 2024, which may have been perceived positively by the market, reflecting a strong future outlook.
Management and Board Changes:
There have been management changes announced in recent months, which might have been received well by investors if they believe these changes will lead to better performance or a more positive strategic direction for the company.
Portfolio Value and Performance: '
Vukile's real estate portfolio value has been significant, and the performance of the stock has been exceeding both the industry and the market over the past year, which can boost investor confidenc
Calgro settings itself for super upside in 2024W Formation has formed on Calgro M3.
We haven't had our breakout yet but it's most definitely forming higher lows. ANd it's above the 200MA with a predominant uptrend.
This is all great news for potential upside.
We'll set the first target at R6.03
FUNDAMENTALS:
Calgro M3, a South African property development company, has been experiencing a rally in its stock for several reasons:
Impressive Financial Performance:
Calgro M3 reported strong financial results for the fiscal year ending in February 2023.
This included a significant increase in earnings per share and overall revenue, demonstrating the company's ability to generate sustainable profits and manage costs effectively.
Robust Revenue Pipeline:
The company has a solid revenue pipeline in residential property development, with a forecast of R15.9 billion.
This includes over 22,000 opportunities and the inclusion of a major development project, Frankenwald, which is expected to add at least 20,000 opportunities.
Successful Residential Developments:
Calgro M3 has been successful in its residential property development segment, with a large number of completed and under-construction opportunities.
This success is a key driver of the company's revenue and growth prospects.
SPG: Bearish Harami at Resistance and Bearish Deep Gartley PCZSimon Property Group has formed a Bearish Harami on the weekly at the PCZ of a Bearish Deep Gartley and Bearish Deep Crab, the PCZs happen to align with weekly Horizontal Resistance and may now lead to SPG making its way down to a 0.886 Retrace as the REITs continue down due to rising yields.
Mortgage Rates have fallen & at major supportGood Morning!
It certainly makes sense for #mortgagerates to follow the bond counterparts & go lower
The monthly chart shows the RSI weakening as it chugged higher.
LONG term, the 3rd chart, we see that rates overcame a STRONG RESISTANCE area & long downtrend, white line. We will soon see if it'll hold that new support, white line.
#RealEstate #InterestRate
"BULL MARKETS ARE BORN ON PESSIMISM"Did you come across several media reports, individuals and others betting on the crash of US economy and how everything will collapse.
Here is a quote by Sir John Templeton - "bull markets are born on pessimism, grown on skepticism, mature on optimism and die on euphoria".
So one can understand with the growing amount of pessimism all around as to which phase of the bull market we are in - yes, just the beginning.
The S&P Real Estate weekly chart shows the impulse move up (through march 2020 to dec 2021) and a subsequent 70% retracement(through dec 2021-oct 2023) of the same.
The index has now just completed a complex triple three correction (WXYXZ) and is all set to move up from here.
The index could double from the current levels in the coming 2-3 years time.
Note*- this is not an investment advice, please do your own research before making any investment decisions.
Welltower: Bearish Gartley with Bearish Div Looking to Fill GapWelltower is yet another Real Estate focused stock that I have been tracking in anticipation of its potential downside. Yesterday they had earnings and it was nothing that impressive, so I think the Bearish RSI Divergence at this PCZ will take over and bring it down to at least $53.40 to fill the downside gap from here
Simon Property Group: Bear Flag into Bearish BAMMSimon Property Group is going to close the month below a Bear Flag as the RSI breaks down and the MACD crosses bearishly.
If this Bear Flag plays out, it will begin to push SPG below the B point of this potential harmonic BAMM, which would only complete once SPG reaches the 0.886 at around the $47.30 level. SPG is simply yet another REITs play that I will be on the lookout for a major correction in.
Regional Banks Are Still in Serious Trouble!Traders,
For the second time this year, regional banks are threatening to cross on over an essential support that has carried us through this secular bull market for 14 (going on 15) years! If our support breaks, I fear that regional banks could drag everything else down with it. Remember, it is regional banks that hold the loans for much of commercial real estate. Much of commercial real estate went vacant during COVID. We are only now beginning to understand the wave of bankruptcies that are crashing in hard as a result!
Watch this line closely or stay tuned here and I will keep you up to speed as I observe any significant changes.
Stewdamus
Emaar: Buy Dubai Real Estate in Liquid FormEmaar
From Covid Low of mar 2020, it returned 4x in 3.5 years, more than the best real estate deal one could get.
And was liquid all the way.....okay liquid 5 days a week !!
At AED 6.3, its available due to the war like situation in Gaza. Load up at the current levels , the best high beta and liquid way to get exposure to Dubai Real Estate.
American Homes 4 Rent: Monthly 3 Black Crows Channel BreakdownAMH has confirmed 3 Black Crows on the Monthly Timeframe and has cracked below an ascending channel and the 21SMA. I expect that we will get severe follow-through as both the Rental Sector and the Real Estate Industry in general continue their decline into the higher interest rate environment.
BX: Evening Star Doji into Bearish BAMM Visible On the MonthlyBlackstone is about to confirm a Bearish Evening Star Doji on the Monthly Timeframe today and is about to break down from its RSI Channel. This could then escalate into a Bearish BAMM on the Macro that would take it all the way down to the 0.886 Retrace around $30.00