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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 CME Real-time Market Data helps identify trading set-ups and express market views better. If you have futures in your trading portfolio, you can check out on CME Group data plans available that suit your trading needs www.tradingview.com DISCLAIMER This case study is for educational purposes only and does not constitute investment recommendations or advice. Nor are they used to promote any specific products, or services. Trading or investment ideas cited here are for illustration only, as an integral part of a case study to demonstrate the fundamental concepts in risk management or trading under the market scenarios being discussed. Please read the FULL DISCLAIMER the link to which is provided in our profile description.
CME_MINI:MES1!Long
by mintdotfinance
Indian Indices - Realize Truth, Ignore Noise (Don't Panic) Small Cap - Mid Cap - Metal - Nifty IT - Media - Realty - Nifty 50 - FMCG - Fin Service - Bank Nifty - Whoa What a Day Today !!! A Full Day of Swing Left and Right to extreme levels. Tell me honestly how many Youtube Channels, Telegram Channels, WhatsApp Groups, Expert Commentaries came today with atleast one of the below Warning Messages See I told you, Mid Cap and Small Cap are due for Correction and the Correction started today This is just the Beginning - more pain ahead Safeguard your Capital, Book SLs on Mid and Small Caps Book profits on your trading stocks, save capital for a market fall And what not...... For a Retail Investor - any of the above message will Translate Only into "Panic Selling" and nothing else. Its the prime duty of so called "Market Experts" to paint the right picture, convey the reality in right way without triggering Panic. Else - better to stay away from giving expert advice - because one Panic message completely Destroys any-and-all Profits a small retail trader would have gained for the past 1-2 months. So, what's the point in giving advice which does not help anyone ??? Now let's review each Index what really happened. The underlying force which controls the market is Support and Resistance. Whether its a Positive/Negative News or Politics or Profit Booking or FII Activity or US Treasury Bonds - eveything operates within the boundary of One-more Support & Resistances 1. Small Cap The support levels were shared in our Telegram Channel last week itself. Look how exactly Small cap index tested and rejected from the Support at 16030. And how big is the wick ? Buyers showing strength lifting price up 2. Mid Cap Once again 2 support levels - 48490 and 48050. One pushed the Wick up and Other was powerful enough to push the Candle Body itself up. Again, Good strength from buyers leading to a Huge Lower Wick 3. Metal Nifty Metal index had the Biggest Fall among Nifty Peers. It had a Flag Pattern BO recently and did a BO-Retest today and found support from 2 levels in the flag (Flag Top and Flag Middle) and the support was strong enough to push the Price higher than the Flag top. So, Still Bullish.... 4. Nifty IT After finishing a Big Rounding Bottom on Weekly, it formed a smaller Rounding Bottom on Daily and after Breaking that as well - it came back to Retest the BO zone. See very clearly the BO zone providing the needed support for IT index. So, this is also in Bullish mode despite the Red candle 5. Media Nifty Media formed a Bearish Double Top pattern on Weekly, but taking support at 2115 - look at the strong bounce. The big fall this week got negated by a Stronger Bullish Green candle. Amazing recovery. There are 3 back to back supports - 2115, 2050, followed by Parallel Channel Trendline around 1950 zone. Until all 3 are broken down - Media sector is BULLISH 6. Realty Nifty Realty formed a Perfect Double Top pattern at 895, but took beautiful support at 875 finally ending up in a Perfect Hammer Pattern which is bullish reversal indicator 7. Nifty 50 I have been screaming of the support zones in Nifty at 21780, 21725 ever since Channels were cautioning about Big fall coming. Look how 21725 gave the push today. Both on Daily and Weekly scale - only Wick below the support levels. On Weekly - the price is comfortably above both support levels - yet people keep passing Panic Messages 8. FMCG On weekly - its a Perfect Rounding Bottom BO followed by a perfect Retest. Finally the price did end ABOVE the BO zone 9. Fin Service Fin Service formed a Gap between 20570 and 20255. The Cavity got Finally filled (as expected) multiple times and price took support form the Long term Parallel Channel Trendline for 2nd time. Strong bounce today - until price falls below 19910 and 19775 - sector is Bullish 10. Bank Nifty The Leader among the Nifty Peers. Strong 620 points up. Same as Fin Nifty - Cavity Filling done and Support Taken from long term parallel Channel trendline Folks - Now tell me - 10 Sectoral Indices have been reviewed here. Nothing Bearish. Yet there is ONLY noise in the entire market, all channels giving instructions to Book Profits, execute Stop Loss. Why ? The Channel Admins, Big Players, Brokerages have so much funds to take on small SLs and rotate their funds, but for small Retail players - even a small SL will destroy their investable principal. Even if you are doing Swing Trading - why to book SLs when the stock is not going Bankrupt ? It will take few days to weeks for the same stocks to recover and you will repent for booking SLs there. Before taking decision on SL booking - following instructions must be followed Wait for Weekly Close Check all your stocks to see how bad the support levels are broken Check where is the next support level Only when the next support level is too far down - take a conscious decision to book SLs. Else close your trading terminal and take some rest. market will do its magic recovery Disclaimer: Stocks-n-Trends is NOT a SEBI registered company. We do not provide Buy / Sell recommendations - rather we provide detailed analysis of how to review a chart, explain multi--timeframe views purely for Educational Purposes. We strongly suggest our followers to "Learn to Ride the Tide" and consult your Financial Advisors before taking any positions. If you like our detailed analysis, please do rate us with your Likes, Boost and share your comments -Team Stocks-n-Trends
NSE:CNXSMALLCAPLong
by Stocks-n-Trends
Can 1st Week of 2024 avoid the Thunderstorm of Dec 20, 2023 ???Remember the Great Sudden Multi-Sector Fall of Dec 20, 2023 where Almost all Sectors of NSE/BSE fell together ??? Refer our 8 Part Series - Decoding the Mystery of the Dec 20 Fall for more explanation of why we faced Major Selling Pressure Across Sectors Is there a possibility of something Similar on the New Year Week ??? - Before we say Yes / No - let's first understand what happened on Dec 20, 2023. If 1 particular Sector (ex: Small Cap) faces its resistance, major small stocks is expected to face a correction. When we have diversified portfolio with multiple sectors - we will still have a healthy Day P&L as other sectors provide some support When All Sectors face their Resistance together - most of the stocks in your portfolio will see RED same day which triggers Panic Selling of weak hands - which aggravates the situation further. 1st Week of Jan 2024 is facing similar situation. 6 out of 13 Sectors what we reviewed are facing their Resistance together. Rather than saying its "Time to be Cautious", I would suggest "Its Time to be Brave". There could be a Panic Selling again from Retail investors, but its just a normal Correction. Those who held their nerve on the Dec 20 crash would vouch for the fact that their Portfolio recovered fully / more than the fall within next 2-3 (or max 5) sessions. Small Cap Mid Cap Energy Realty IT Nifty The Remaining 7 Sectors - Look good with BO and more room for Upward move. So, this time, it won't be as bad as Dec 20 and if people realize their Mistakes from Dec 20 and hold their nerve - we can collectively overcome the situation 7 Sectors that are Bullish / Have more room for Upside: Pharma Media Metal Auto Finance Bank Nifty FMCG If you like our analysis - please do share your views, likes, Boosts and support us - Team Stocks-n-Trends
NSE:CNXENERGYShort
by Stocks-n-Trends
1
"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.
SP:S5REASLong
by neeraj_2_sharma
Sector Analysis Four sectors that are outperforming NSE:NIFTY {A} NSE:BANKNIFTY Though not by big margin definitely out performing NSE:NIFTY . Break above 42000 will be a great sign. Stocks to watch out; 1) NSE:CANBK 2) NSE:ICICIBANK 3) NSE:INDUSINDBK 4) NSE:SBIN {B} PSU Bank . 1) NSE:CANBK 2) NSE:SBIN 3) NSE:BANKBARODA {C} NSE:CNXINFRA got a big push at Budget and is evident from stock performance . 1) NSE:LT 2) NSE:SIEMENS 3) NSE:ABB 4) NSE:NTPC {D} BSE:MIDCAP is best out performer, if overall market improves will run away. 1) NSE:CUMMINSIND 2) NSE:PGHL 3) NSE:HAL 4) NSE:TORNTPOWER
NSE:CNXINFRALong
by Vasu_devan
Current Stage in Sector RotationSector rotation is important to gauge the current economical strength that we're in. This is the 60 day sector rotation summary. (180 day also looks pretty much the same.) It's very clear that we're in a bear market right now, which doesn't happen often (1-2 every decade) You can clearly see that that Discretionary / Tech / Industrials / Materials, are all going down where Energy / Staples / Healthcare / Utilities / Financials are going up. Also, looking at precious metals (not on the charts) you'll notice that gold and silver are breaking out of their flags. Always look at these 2 charts every couple months to detect where we stand in our economy. So what now? Cash is king, raise as much as as you can. There's a strong possibility that we might enter a recession, many variables play in this as war tensions from Russia/Ukraine, and China/Taiwan seem real. And the fact that inflation is high and the fed will increase rates faster than we thought.
BITSTAMP:BTCUSDEducation
by MoonBets
1
Classic Cup & Handle patternWe are seeing a cup & head pattern on this real estate ETF. How to enter a position: First entry: 20% of full amount, when it breaks the high of the handle of the cup. Second entry: 80% is the cross above the high of the cup, confirming the bullish pattern. Risk-reward setup: Profit-exit: Full target is $53 approximately. 10sma has been working well with a trailing stop for a partial sell. Loss-exit: the target is denied, if we close below the november 1st low; at which point I would exit 100%. Good luck, and have a great weekend everyone!
AMEX:XLRELong
by dorfmanmaster
ICLN - Clean Energy ETF - sector analysis, long setupICLN is setting up well on the monthly charts. Points for consideration: 1. Price above 20 Day, 20 week and 5 month MA. This should act as a nice support zone 2. 200 Day Moving Average right above us that could act as potential resistance. 3. RSI is crucial zones and positive structure 4. Break above 200 Day MA will be seen as very bullish on daily/weekly close basis Other ETFs in the same Clean Energy space are as below 1. PBW, TAN, CNRG, ACES, PBD,ICLN, QCLN, SMOG, FAN, NLR, GRID 2. Except NLR and GRID, all the others are below their 200 Day MA. 3. All the above ETFs have shown recent strength and above their 9 day and 20 Day MAs From a sector ETF Relative Ranking Perspective, these are my current Rankings on relative strength basis (as on 15th Oct 2021 business close basis) and this is dynamic with price changes ETF Name Ticker Strength Score Rank iShares Global Clean Energy ETF ICLN 60.00% 5 Invesco WilderHill Clean Energy ETF PBW 20.00% 8 Invesco Solar ETF TAN 100.00% 1 SPDR S&P Kensho Clean Power ETF CNRG 90.00% 2 ALPS Clean Energy ETF ACES 80.00% 3 Invesco Global Clean Energy ETF PBD 30.00% 7 First Trust NQClean Edge Green Energy Idx Fd ETF QCLN 70.00% 4 VanEck Low Carbon Energy ETF SMOG 40.00% 6 First Trust NQ Clean Edge Smart Grid Infra Idx ETF GRID 10.00% 10 First Trust Global Wind Energy ETF FAN 20.00% 8 Will be preparing my views on the top 5 ETFs in this space based on the above relative strengths and will link them for your views and observations Stocks to look for currently in this sector are as follows 1. RUN 2. JKS 3. PLUG 4. BWEN 5. SEDG 6. ENPH 7.TPIC 8. FSLR 9. FCEL 10. EVA 11. REX 12. AY 13. ORA 14. TPIC 15. EVA 16. CVA AQN is currently showing a potential for downward break below its 52 week low, while TPIC, EVA and CVA are very close to their 52 week high Interesting sector, has been all around the place so far.
NASDAQ:ICLNLong
by LoveForCharts
ASX:XMM - Keep a close watch on sector and companiesASX:XMM - Keep a close watch on sector and companies ~The sector is in an uptrend after making a bottom in Jan 2016 ~the previous high was made in Nov 2008 ~after a gap of close of 13-14 years sector has come to the limelight. ~Strong global demand ~China demand for minerals ~ Global infrastructure post-COVID-19 - Govt push ~DON't forget over 50% of the consumption of iron ore is from infrastructure ~Iron ore consumption worldwide increasing steadily ~ ASX listed companies in my watch list. 1. $BSL 2. $CHN 3. $DEG 4. $ILU Trend analysis Fundamental analysis Beyond technical analysis
X
by Peaceful-Weekend-Investing
1
Buying Energy dipTechnical Analysis / Trade Setup There could be a trade coming up next week in energy. The 50sma has worked as support 2 consecutive times, and could potentially do it again. This level is also coincidental with the 50% Fibonacci retracement level & 2020 highs; which suggests this support level has more strength. Backtesting Data There is a very interesting discrepancy between stocks within the energy sector going on; where most stocks are above the 200sma, byt below their 10sma. --> From 1979 until today, there has only been 12 times where this has happened... What did it mean going forward? Energy was up 70% of the time looking a year later, with an average of 27%. Fundamental Analysis Bull case for energy: Oil is priced above the level at which the average company can cover expenses; Supply has declined with lower production and OPEC compliance; Large diversified energy companies have strong balance sheets and access to capital; The ongoing recovery of the global economy bodes well for returning oil demand Bear case for energy: Oil demand is still down significantly. Valuations are opaque. There is weak long-term stock price momentum. ~ For the full article on sector view, send a message and I will be happy to share the resources I have. ~
AMEX:XLE
by dorfmanmaster
5