After rallying from long-term support following a cascade-like decline, the Real Estate sector has set up an attack on long-term resistance and the declining 50-day moving average. REITs continue their consolidation relative to Real Estate, while Real Estate Management and Development eyes a breakdown on a relative basis. Short-term breadth received a positive boost in the October 31st trading session, leaving investors to question—will that be enough to power the sector back to the 50-day moving average?
S&P 500 Real Estate
Real Estate remains below the declining 50 and 200-day moving averages but has held support at the 210 level to give investors the countertrend rally. Resistance comes into play near the 50-day moving average, currently near 240 but moving to the downside. For now, the series of lower highs and lower lows since January is still well entrenched. It is hard to make a strong case for the group until the moving average is eclipsed to the upside.
Relative to the S&P 500
On a relative basis, the group remains in a bearish trend below the declining 50-day moving average. The ratio has cascaded further to the downside since we last highlighted the group as an underperformer on September 29th.
Within the Real Estate Sector, Real Estate Investment Trusts are the drivers of the trend. The group’s price action closely tracks that of the border sector. Price is trading below the declining 50 and 200-day moving averages and is trapped between support and resistance.
Relative to the Real Estate Sector, the group is in consolidation as it battles price-based support and the declining 50-day moving average.
The Management and Development stocks are holding support near 230, essentially in the same position as a month ago. While the lack of a breakdown can view as a “positive,” it is hard to make a compelling case for these stocks until the moving averages are broken to the upside.
Relative to the Real Estate sector, the group remains below price-based resistance and is threatening a break below the 50-day moving average.
The percentage of Real Estate components trading above their 20-day moving average received a positive boost in the October 31st trading session crossing above the 80% mark as short-term breadth continued its improvement from washed-out levels seen earlier in the month. There were 304 instances since 2002 where the percentage of Real Estate component trading above their 20-day moving average crossed above the 80% mark for a median gain in the sector of 2.63% with a 60.93%-win rate over the following quarter. While these results have been attractive, investors would be prudent to manage risk appropriately as the index remains below both 50 and 200-day moving averages.
This note is a preview of our Sector Deep Dive.
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