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Despite being a traditionally “defensive” sector in the S&P 500, the Real Estate sector continues to remain under pressure in this environment. The relative performance has offered fully invested market participants in-line performance at best, as the trend of sideways relative price action continues to play out. Within the industry groups, Management and Development received a bullish boost over the previous week of trading, while REITS continue to struggle.

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Real Estate

In our last note on the space, we highlighted that Real Estate had not been spared from the selling pressure that accompanies bear markets. Unfortunately for investors who use the group as a haven, the situation has gone from bad to worse. The sector is below the pre-COVID highs and the declining 50 and 200-day moving averages. Under these levels, the bears are in control, and odds favor a continued downside.

Relative to the S&P 500

On a relative basis, the group is below resistance and the 50-day moving average. In-line performance from this defensive sector must be considered a letdown.

Industry Trends

Real Estate Investment Trusts continue to track the broader sector. The group is below the declining 50 and 200-day moving averages while moving below the pre-COVID peaks (a call we made in the last note on the sector). 

Relative to the broader sector, the group is in the process of fading from resistance and is trading below the declining 50-day moving average. This is not a very compelling technical setup.

Real Estate Management and Development can be considered a decent house in a bad neighborhood. The group is rebounding from support to retake the 50-day moving average while holding below the declining 200-day moving average. Breaking above 280 would make the bull case slightly better.

Relative to the Real Estate sector, Management and Development are reversing higher and have regained the 50-day moving average. Investors who must have exposure to the space may want to have this pocket of the sector on the radar.

Breadth

The percentage of Real Estate components making new one-month highs received a boost in the July 18th trading session, crossing above the 10% mark for the first time since late April of this year. There were 618 instances since 1998 where the percentage of Real Estate components making new one-month highs crossed above the 10% mark for a median gain in the Real Estate sector of 3.07% with a 64.13%-win rate over the following quarter. While these results have been attractive, investors would be prudent to wait for a breakout above the pre-COVID highs and the 50-day moving average in the sector to have confidence in a bullish upside move.

This note is a preview of our Sector Deep Dive. See our thoughts and more in the full report.

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Disclosure: This information is prepared for general information only and should not be considered as individual investment advice nor as a solicitation to buy or offer to sell any securities. This material does not constitute any representation as to the suitability or appropriateness of any investment advisory program or security. Please visit our FULL DISCLOSURE page.