Tuesday, May 29, 2007

U.S. Real Estate Index

Time to revisit the U.S real estate index or the IYR. I touched on it in an earlier post see 'Opening Day'. The IYR initially broke the neckline of the H&S about 83.85 (May 16) on expanding volume which is a good thing, Today we are rallying and testing that neckline from underneath.We are getting a 2nd test of the 200day from underneath, this was support prior so if the trend has changed it should start to act as resistance. Today's action, currently 83.70 on IYR and 80.90 on SRS is an excellent 2nd chance for those who missed the first entry point and a good add point, for those who caught it. Always use stop losses. I am playing the SRS, ultrashort proshares real estate. For those who want/need news, you can attribute this rally to the Tishman Lehman buying Archstone for 12 bill. As former senator Everett Dirkson once said a billion here, a billion there and pretty soon you're talking about real money. Either way another indication of the easy money environment we trade in today, completely disconnected form reality.

Speaking of news, too many retail investors trade the news and by this I mean buy on a positive news event like today's Archstone news, or sell a negative event. What you must remember is that the news conforms to the tape, not the other way around. A stock is going down and there is no reason or news for it, be careful it usually is going down for a reason and while the reasons may not be evident immediately they will eventually show up and by then the flood gates may open. Trading news is going to cost you money sooner or later, more ofter sooner. All news is built into the tape by traders, fund managers, insiders, hedgies, etc. I could go on but you get the idea. By largely ignoring the news for trading purposes you will avoid falling into the trap of what I call "news justification syndrome". I know it all too well because it has caught me. Think back to a position you had, going against you by the way, and the news was good or neutral yet the stock kept going down. The charts patterns don't lie, they may fib or not reveal everything at once but over time (ie. longer term) chart patterns are to us what a lie detector is to law enforcement.
Naz - looking toppy but its done that before, like to see 45.90 broken on the downside.
Crude - need to see it get thru $67 and change with some conviction. fundys are glowing but still in correction mode.
Gold - another one just grinding, don't forget that commodities are an area of mucho profits and could easily get sold off heavy if the market rolls over. The shakeout will be fast and furious and will probably offer an excellent entry point for those liquid. Ditto for silver to the exponent 2. Watch the 10-11 neighborhood here.
Good trading to you.
None of this information is offered as a solicitation to purchase or sell rather just my thoughts out loud so in lawyerspeak, govern yourself accordingly.

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