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Real Estate Crash The Next Shoe To Drop – Part III

Our continued research into the state and status of the Real Estate market continues to point to a process that is starting to unfold in the US which may put price and activity levels at risk.  Within the past two segments of this research article, we’ve highlighted how market cycles and recent market data point to a Real Estate market that may be in the early stages of a downward price cycle.

Additionally, within Part II of this article, we highlighted the human psychological process of dealing with a crisis event which also suggests a deepening price contraction event may take place within the next 12 to 24+ months.

US NEW HOME SALES DATA WAS JUST RELEASED

We believe the psychological process is just starting to become evident in the current data.  For example, the US New Home Sales data was just released and it shows the sharpest decline in activity since June 2010 (nearly 14 months after the actual bottom in the US stock market in March 2009).


Source: https://www.investing.com

Our researcher team believes investors/traders and many consumers have become complacent with the current data and are simply in denial in attempting to relate future economic outcomes to the current set of circumstances.  There has never been anything like this to disrupt global economic activity and consumer engagement over the past 100+ years.  Not even the Great Depression or WWII was on this scale.

When you stop to consider the scale and scope of this COVID-19 virus event and the process of recovery, one should really ask serious questions about how quickly you believe the global economy will be able to recover to 2018/2019 economic activity levels, how quickly the world can create and sustain 25~75 million new jobs, and how quickly global nations can attempt to regain GDP output levels nearly equal to 2018/2019 levels?

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

IYR MONTHLY CHART

Take a look at this IYR Monthly chart, below.  The initial collapse in the markets in 2007 was the start of a similar type of economic and psychological crisis event.  Notice how IYR started to move lower in early 2007 – well before the real collapse in the US economy began in December 2008. Another aspect to consider is how long it took for IYR to recover back to near 2007 levels.  From the bottom in early 2009, it took nearly 6 years for IYR to reach levels above $80 again.

CASE-SHILLER US HOME PRICE INDEX CHART

This Case-Shiller US Home Price Index chart shows a similar setup taking place.  The peak in home price values on this chart happened in early 2006 – well before the peak on the IYR chart in early 2007.  The interesting component of this Case-Shiller chart is that real home price values didn’t bottom until early 2012 whereas the speculative traders pushed the bottom in IYR in mid-2009.  We believe the speculative side of investment and asset growth paired up near or after the 2011-12 time-frame where improved levels of economic growth and activity prompted real increased asset valuations in Real Estate.

Currently, using the Realtor.com Hotness Index (https://www.realtor.com/research/reports/hottest-markets/ ), we can see that data reported in December 2019 shows a moderate shift away from certain “hot” areas in larger market areas.  Pay attention to how the RED colors in 2018 have changed (in some areas) compared to Q1 2019 levels on these charts below.  We believe the continued shift towards a Real Estate recession is currently taking place and that these Hotness areas will suddenly cool very quickly as new data is published.

CALIFORNIA HOTNESS MAP

FLORIDA HOTNESS MAP

NEW YORK HOTNESS MAP

FRESH DATA RELEASED TODAY FROM REALTOR.COM

Fresh data released today from Realtor.com data (updated on 4/2/2020: https://www.realtor.com) suggests a peak in the housing market may be setting up.  Total active listings have declined steadily over the past 4+ years while median price levels have continued to climb.  This is a sign that the Real Estate market has been within a moderately tight “seller’s market” where buyers are competing for the best properties.  The Increase (Blue) to Decrease (Orange) data suggests that price levels tend to stabilize in Q4 of each year where sellers are unwilling to move away from their expected listing price.  Q1 through Q2 see dramatic increases in both levels of price alterations as the activity level tends to flatten out in the early portion of each year.

CONCLUDING THOUGHTS:

Our conclusion from this data is that sellers may become increasingly desperate to reprice assets if a shift in the Real Estate market dynamics takes place as a result of the COVID-19 virus event. As of July 2019, price level decreases reached the highest levels over the past 4+ years reaching 30% of all total listings.  Currently, this ratio for March 2020 is at 21.8% and is certain to climb higher.

As the human process of dealing with this virus crisis event continues to take place, we are certain that asset values and expectations will shift as they have in the past.  Jobless numbers hit again today with another massive 4.42 million new jobless claims over the past week.  Take a look at the charts below to see just how dramatic this event is turning out to be for American workers.


Source: https://www.investing.com

Anyone expecting the Real Estate market to survive this massive virus event unscathed is simply not seeing the data as clearly as one should.  We believe once the data starts to breakdown to really show the contraction in activity, price, and expectations, then a new Real Estate recessionary trend will take place where real values will attempt to establish a true bottom.   Our belief is this process may take as long as 18+ months to really bottom out and the true bottom really depends on when consumers transition away from the fear and helplessness phases and start to become optimistic again.

I am hoping people can see what I am trying to warn about, which is the next major market crash, much worse than what we saw in March. See this article and video for a super easy to understand the scenario that is playing out as we speak, and real estate will follow.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is going to be an incredible year for skilled traders.  Don’t miss all the incredible moves and trade setups.

Subscribers of my ETF trading newsletter had our trading accounts close at a new high watermark. We not only exited the equities market as it started to roll over in February, but we profited from the sell-off in a very controlled way with TLT bonds for a 20% gain. Yesterday we closed out SPY ETF trade taking advantage of this bounce and our account is at another all-time high value. Exciting times for us technical traders!

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during a time like this, you could lose 25-50% or more of your entire net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how and one of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

Real Estate Crash The Next Shoe To Drop – Part 2

As we continue to delve into the looming Real Estate crisis that will likely hit the US and globe over the next 12 to 24+ months, we want to focus on the human psychological process of dealing with a crisis event and how that relates to economic engagement.  In the first part of this research article, we discussed how the time-line and events that have unfolded over the past 120+ days have setup a continuing global crisis event.  The best of our knowledge, there has been nothing like this, other than massive wars like WWII, that have taken place on the planet over the past 75+ years.

This presents a very real possibility that human psychological processes have engaged throughout the planet that may disrupt how effective the recovery efforts are in the near future.  If humans engage in a traditional psychological crisis-cycle process, then there is little chance that the economic recovery will reach 2018-2019 levels very quickly.  Let’s review the psychological process of a crisis event.

THE NORMAL PSYCHOLOGICAL REACTIONS TO A CRISIS EVENT ARE:

Vicarious Rehearsal: People that are distanced from the crisis event (location or expectations) tend to react in a way that reflects their belief that “it won’t result in any dramatic changes to their lives”.  Thus, they continue behaving and acting as they would without the crisis.

Denial: The process of denial takes on many forms.  Some people simply ignore the warnings or information related to the crisis.  Others become agitated or confused.  Some simply chose to believe the threat is not real and others may believe the threat does not relate to themselves.

Stigmatization: Sometimes, segments of society may become stigmatized by their community as anger or blame drives people to believe infected people or segments of society that may promote the crisis event are identified.  We’ve already seen some of this type of activity throughout the globe take place.

Fear and Avoidance: Fear becomes a central psychological element that may drive certain people to act in extreme, and sometimes irrational, ways to avoid the perceived or real threat.  Fear, much like Greed, is to primary element of all human activity and we must understand these components and how they transition throughout this virus event.

Withdrawal, Hopelessness, and Helplessness:  When people realize the threat is real and feel there is nothing they can do or change in their lives to avoid the consequences of the threat – a feeling of Hopelessness and Helplessness begins to set in.  When this happens, people tend to withdraw from normal activities and isolate themselves from the threat and society as a whole. (Source: https://www.orau.gov)

We believe these components of how society reacts to a crisis event are more like a “transitional process” than a series of separate events or actions.  We believe, initially, Vicarious Rehearsal and Denial are the initial reactions to a crisis event.  Then, these transition into Stigmatization and Fear when society realizes the threat of the crisis is very real and tangible.  Lastly, society moves into a balance between the last three elements where Stigmatization, Fear, and Hopelessness permeate as the crisis event continues to unfold.

Can we find any evidence that consumers were acting in a manner consistent with this psychological process within the data?  What would we look for in the data and how would we identify key characteristics of this psychological process?

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

First, we would look for Vicarious Rehearsal and Denial in the form of “opportunity and greed” in the data.  The US Fed lowered interest rates to near ZERO on March 15, 2020.  This may have prompted a surge in refinancing and purchase commitments from qualified buyers.  We would look for a surge in mortgage applications in March 2020 as the expansion and severity of the virus crisis was surging.  Additionally, we would also look for a surge in home prices and sales levels as qualified buyers attempted to profit from lower rates.

When we look at the charts below, pay attention to the spikes on the charts in March 2020 and how they correlate to the US Fed decreasing interest rates just prior to the shut-down “National Emergency” order from President Trump.  The good news in early 2020 related to Q4:2019 earnings and economic data seemed to lull people into believing the risks were minimal.  Well, quite a bit has changed since then…

US MBA Mortgage Applications (WoW): Notice the spike on the week of March 11, 2020, above 50?  This level was nearly double the previous peak levels going back over 2 years.  A flood of buying and refinancing activity took place in early March 2020 near peak price levels.

US Existing Home Sales (MoM): This existing home sales data shows that both January and March 2020 exhibited strong sales numbers of existing homes.  Pay special attention to how quickly this data changed in April 2020.  Existing home sales levels have collapsed from the previous monthly levels as consumers have moved beyond the Denial stage and into the Fear stage.

US House Price Index (MoM):  This chart shows that house price levels are still appreciating while demand has already started to collapse.  Again, pay attention to what happened in March 2020 and what is happening in April 2020.  Mortgage applications have collapsed.  Existing home sales have collapsed.  Yet, prices remain rather high right now.  It would appear that home sellers are reluctant to decrease pricing as aggressively as potential buyers are exiting the market.  Eventually, the lack of real demand will prompt price levels to contract to attract interested buyers.  As we’ve seen before, though, when prices start to decline – a vicious cycle begins where potential buyers wait out the bottom or “low-ball” offers because they know the dynamics of the markets have changed in their favor.

US Jobless Claims 4-Week Average (WoW):  The real kicker, in our opinion, is how the shut-down has resulted in a massive segment of new job losses in the US.  It is hard to argue with the fact that the “average” 4-week jobless claims number shot up to levels above 1,000,000 recently.  This is the highest level we’ve seen in this economic indicator EVER.  These levels are nearly 10x the 2008-09 credit crisis levels – trying to put this into perspective.

When we have massive amounts of people suddenly losing their jobs (sources of income), this creates a massive disruption in the supply/demand side of the Real Estate market.  How massive is this number??  Take a look at the last chart…

Yes, this is a real chart of the jobless situation in the USA.  Please remember, if the situation in the USA is as it is being reported, then the situation throughout the rest of the world may be similarly related to job losses.  The point we are trying to make is that the job losses recently have been massively higher than anything we saw throughout the 2008-09 credit crisis – nearly 800% to 900% more massive.

I am hoping people can see what I am trying to warn about, which is the next major market crash, much worse than what we saw in March. See this article and video for a super easy to understand the scenario that is playing out as we speak, and real estate will follow.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is going to be an incredible year for skilled traders.  Don’t miss all the incredible moves and trade setups.

Subscribers of my ETF trading newsletter had our trading accounts close at a new high watermark. We not only exited the equities market as it started to roll over in February, but we profited from the sell-off in a very controlled way with TLT bonds for a 20% gain. Yesterday we closed out SPY ETF trade taking advantage of this bounce and our account is at another all-time high value. Exciting times for us technical traders!

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during a time like this, you could lose 25-50% or more of your entire net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how and one of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

Real Estate Crash Is The Next Shoe To Drop

The past few weeks and months have been very interesting to see how the global central banks and governments have attempted to position themselves ahead of this COVID-19 virus event.  We continue to suggest that we are just starting the process of navigating through this potentially destructive virus event.  We believe the sudden onset of the virus pandemic has sent a shock-wave throughout the globe in terms of expectations and valuations that are, just now, starting to become “real”.  Let us try to explain our thinking and how this relates to Real Estate…

Before we continue much further, we suggest taking a moment to review our previous research articles related to the Real Estate market which we predicted the selloff and falling values. Both of these articles were at the top of the Yahoo finance and Google with hundreds of thousands the week we posted them:

Real Estate Crash Predicted Part I – Click Here
Real Estate Crash Predicted Part II – Click Here

The COVID-19 virus event is a global crisis event that is currently in the very early stages of consumer psychological processing.  All types of crisis events prompt some forms of typical human reaction.  We believe the Real Estate market may be the next big asset revaluation event as consumers continue to process the COVID-19 virus crisis and the consequences of this event.

REAL ESTATE CYCLES

Real Estate cycles typically transition through the following phases as supply and demand functions work through the markets.  Pay attention to the middle of this cycle chart.  In the Expansion and HyperSupply stages, once supply peaks and prices somewhat peak/stabilize, a transition takes place in the market where buyers chase premium properties and push price levels moderately higher.  The Recession Cycle is typically a disruptive cycle that is the result of an economic/income disruption.  When people can’t earn enough to satisfy their debt obligations and or provide for their families, then the Real Estate cycle begins to contract.

An event like this, the COVID-19 virus event, would typically start out as a regional/local event.  This did happen as it roiled certain areas of China in late 2019.  Watching how China attempted to manage and hide the extent of the virus explosion within their country was painful to watch.

The Chinese state media was pushing out information and numbers which didn’t match anything seen on the streets and being reported by others within China/Hong Kong.  This “disconnect” and the misinformation presented within this early virus pandemic event is critical to understanding how the world will now deal with this mess.  So, keep in mind, everything was somewhat “clicking right along” in late 2019 and early 2020 as China was fooling the world.

Before we continue, be sure to opt-in to our free market trend signals 
before closing this page, so you don’t miss our next special report!

AS IT UNFOLDED…

The Chinese New Year celebration fell on January 25, 2020 (Year of the Rat).  Near this time in China, hundreds of millions of people travel “back home” to celebrate the New Year with their families and friends.  As this travel starts typically 4 to 5 weeks ahead of the date of the New Year, China allowed potentially infected people to travel throughout the world before shutting down travel within China on January 23, 2020.  This locked infected and uninfected people into areas within China while the Chinese government began extended efforts to control the virus outbreak.

By early February 2020, the virus had been confirmed in India, Philippines, Russia, Spain, Sweden, the United Kingdom, Australia, Canada, Germany, Japan, Singapore, the US, the UAE, and Vietnam.  In essence, the Chinese lock-down presented a very real opportunity for those that had visited China and left to be “locked into location” outside the quarantined areas within China.  If they were infected or asymptomatic carriers, these people now became source-spreaders.  On February 3, 2020, Chinese President Xi Jinping indicated the Chinese government knew about the virus well before the public alarm was raised – as reported by the Chinese state media.

By Mid February 2020, China had over 40,000 infections and over 900 confirmed deaths related to the COVID-19 virus.  Nearly a week later, near February 19, China reported more than 74,000 total cases and 2,100+ deaths.  By this time, general global panic had already been set up and this is the point of this article – how consumers respond to a crisis event like a virus pandemic. (Sources: www.aljazeera.comwww.businessinsider.com)

The reason we went through all of this detail is to illustrate how the virus event started as a localized event in China, near the end of 2019.  Yet, by early February 2020, less than 35 days later, the virus event suddenly became a global event – panicking the world.  The COVID-19 virus event has now turned into a global economic disruption event that has dramatically reduced most people’s ability to earn an income.  Businesses and individuals will feel the consequences of this event and we believe the economic contraction is just starting. How do consumers respond to an event like this?

In PART II of this series, we’ll continue to delve into the reasoning behind our research and why we believe the Real Estate market will become very risky for investors over the next 24+ months.

As a technical analyst and trader since 1997, I have been through a few bull/bear market cycles in stocks and commodities. I believe I have a good pulse on the market and timing key turning points for investing and short-term swing traders. 2020 is going to be an incredible year for skilled traders.  Don’t miss all the incredible moves and trade setups.

I have to toot my own horn here a little because subscribers and I had our trading accounts close at a new high watermark for our accounts. We not only exited the equities market as it started to roll over, but we profited from the sell-off in a very controlled way, and yesterday we locked in more profits with our SPY ETF trade on this bounce.

I hope you found this informative, and if you would like to get a pre-market video every day before the opening bell, along with my trade alerts. These simple to follow ETF swing trades have our trading accounts sitting at new high water marks yet again this week, not many traders can say that this year. Visit my Active ETF Trading Newsletter.

We all have trading accounts, and while our trading accounts are important, what is even more important are our long-term investment and retirement accounts. Why? Because they are, in most cases, our largest store of wealth other than our homes, and if they are not protected during a time like this, you could lose 25-50% or more of your entire net worth. The good news is we can preserve and even grow our long term capital when things get ugly like they are now and ill show you how and one of the best trades is one your financial advisor will never let you do because they do not make money from the trade/position.

If you have any type of retirement account and are looking for signals when to own equities, bonds, or cash, be sure to become a member of my Long-Term Investing Signals which we issued a new signal for subscribers.

Ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
Chief Market Strategies
Founder of Technical Traders Ltd.

Part II – We Are Concerned About The Real Estate Market

In this second part of our research into the potential collateral damage, the Covid-19 global virus event may cause in the housing and commercial real estate markets, we want to start by sharing some information that severe cracks are already starting to appear in the entire system.

Hedge funds and banking institutions may already be feeling the pressure to attempt to contain the losses that are piling up (source: https://www-bloomberg-com).

An extended decline in the global markets will continue to place pressure on institutional financial markets, banks, hedge funds, and other traditional lending and investment firms.  Investors will start to pull investment capital away from risk (out of the markets and funds) and may expose some of these larger institutions’ excessive leverage and risk exposure in the process.

This is almost exactly what happened with Bernie Madoff when his firm, Bernard L. Madoff Investment Securities, collapsed in December 2008.  As long as there was no pressure on his firm from clients pulling out capital or asking too many questions, he was allowed to continue running his Ponzi scheme.  Once investors started pulling capital out of the firm and questioning the transactions/reports, it became evident that it was all a house of cards and would come crashing down quickly.

If larger investment firms and hedge funds are attempting to “buy the dip” at this point in time, we believe they are making a grave mistake.  We believe the downside risks associated with the Covid-19 virus event are just starting to unfold and the collateral damage that may come from this massive global shutdown that is currently taking place will be unprecedented.  We don’t believe there has been anything like this happening in any recent history – even WWII pales in comparison to this event.

News is starting to hit the wires about large investment firms and Real Estate investment companies sounding the alarm  The one news item out this weekend that caught our attention was this one from https://www-bloomberg-com. The fear is evident in the short content of this news article.

“Loan repayment demands are likely to escalate on a systemic level, triggering a domino effect of borrower defaults that will swiftly and severely impact the broad range of stakeholders in the entire real estate market, including property and homeowners, landlords, developers, hotel operators, and their respective tenants and employees,” he wrote.

Just take look at the foreclosures in the major cities starting to spike in the maps below. This was before the virus closed down most businesses, and everyone losing their jobs. Give the fact that 70% or more of the world lives pay-check to pay-check, foreclosures and real estate values are likely to plummet lower to an extreme similar to how overpriced they are now.

I have talked about his in some presentations, and in videos in the past how real estate is grossly overvalued and when the music stops, prices will tumble. Huge opportunities for those who can preserve their capital until the recession matures enough will be able to buy real estate, businesses, and equipment for pennies on the dollar, but this will take another 1-2 years from now I imagine, but it will be great for those with money on hand when things get ugly.

Be sure to opt-in to our free market trend signals before closing this page, so you don’t miss our next special report!

CURRENT LOS ANGELES FORECLOSURE MAP
(SOURCE: ZILLOW.COM)

CURRENT SAN FRANCISCO FORECLOSURE MAP
(SOURCE: ZILLOW.COM)

CURRENT NEW YORK FORECLOSURE MAP (SOURCE: ZILLOW.COM)

Many of you may remember my Crunching Numbers article from just a week ago where I attempted to model what I believe would be the likely outcome of US GDP over the next 5+ years?  Well, it now appears others are following up with their own predictions for US GDP.   Based on some of the expectations within this Bloomberg article, my predictions pale in comparison to these comments.  Source: https://www.bloomberg.com

Now, let’s try to be realistic about how this entire process is likely to take place.  We know the economy will find a base (at some point) and attempt to recover from this virus event.  The question is what does that base look like and where is the bottom?

We won’t really know where the bottom is in the global markets until most of the unknowns have been processed, most of the collateral damage has been identified and processed, and consumers realize the bottom is in sight.  At that point, there is a real chance that the global markets will begin a recovery process that may eventually push to new all-time highs.

What we’re concerned about right now is the Q1 and Q2 economic activity and how that relates to consumer markets, credit markets, existing business enterprises and the potential collateral damage to hard assets like homes, commercial real estate and other foundations of wealth.  We believe the first few dominos of this event will be the collapse of jobs, earnings, and consumer spending.  The longer the global stays in a mostly shutdown economic environment, the greater the risks these critical numbers will implode – possibly taking with it the rest of the economy.

We believe the suspension of Foreclosures for a potential 12 month period may not reduce the total number of foreclosures across the US, we believe it may compound the problem.  The suspension effort is designed to help people stay in their homes if their incomes become threatened or lost.  But the reality is that a Foreclosure suspension will simply start to build larger and larger numbers of properties in foreclosure (waiting for the suspension to be lifted) while home prices potentially collapse.

We’ll dig into more data in Part III of this article and attempt to illustrate the data we believe will point to a clearer picture of how all of this may unfold in the near future.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

Concerned About The Real Estate Market? Us Too!

The current global Covid-19 virus event has upended everyone’s forward expectations related to the US and global economy.  Recently, President Trump has announced a 12-month reprieve for homeowners who find themselves without income, or a job, because of the US National Emergency related to the Covid-19 pandemic (source: https://www.npr.org).  All of the recent repositionings of the global markets and forward expectations got us thinking about “what happens after 8 to 12+ months?  How will the US and global markets attempt a recovery process – if at all?”.  Today, we are going to try to start digging into the data that we believe is relevant to the future in terms of hard asset prices (home and other property) and more liquid asset prices (global financial markets).

First, we want to preface this article by stating that humans are somewhat predictable in terms of how they will react in emergency or panic situations like this current Covid-19 pandemic.  Initially, they will react to protect what is vital to them (family, assets, safety).  This same thing happened in the 2008-09 credit market crisis market collapse.  Then, after a bit more time, people change their thinking and start to adapt to the situation as it unfolds.  We believe that 30 to 60 days from now, as more information becomes available and consumers globally are more capable of addressing the true longer-term risks of this virus event, a social process will begin to take place where valuations and expectations will adjust to the new perceived outcome (whatever that may be).

The global stock market has collapsed nearly -35% based on our Custom Indexes.  The SPY has collapsed -32.25% since February 23, 2020.  During the 2008-09 Credit Crisis, the SPY collapsed -57.50% before finding a bottom near $67.10.  We believe this initial price decline in the global markets is just the first downside price collapse of what may become many.  Ultimately, we believe the 2015/2016 lows will become the ultimate support for this downside move in the US markets.

Be sure to opt-in to our free market trend signals before closing this page, so you don’t miss our next special report!

SPY WEEKLY CHART

CUSTOM REAL ESTATE INDEX WEEKLY CHART

CUSTOM EUROPEAN INDEX WEEKLY CHART

The data that is currently being reported and posted is data from January and February 2020.  Current expectations for March data look grim (at best).  Jobless claims, hours worked, and other economic data for the US and global markets may shock investors and the general public for many months to come.  In 2008-09, these types of large economic contraction numbers were not uncommon.  We want to prepare all of our friends and followers that we believe the next 6 to 12+ months could somewhat mirror what we saw in 2008-09 – be prepared.

If our assumptions are correct, the reprieve in Foreclosures and Mortgage repayments for US consumers may not do much to resolve the ultimate problem.  The problem will quickly revolve around the issue of how quickly the US economy can resume somewhat normal functions after the virus event subsides.  We believe the reprieve offered to US consumers will assist in making the data a bit more tolerable for a short period of time, but ultimately any extended disruption in the US and global economy will result in extended risks in hard assets like homes, commercial property, and future valuation expectations.

(Source: realtytrac.com/statsandtrends/foreclosuretrends/)

This multi-part research article will dig deeper into the data and expected data to help you prepare for what may be likely in the markets (hard and soft).  Now is the time to prepare for what could become one of the biggest disruptions in the global markets and global society we’ve ever seen.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for short-term swing traders.

Visit my ETF Wealth Building Newsletter and if you like what I offer, and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis.

Chris Vermeulen
www.TheTechnicalTraders.com

Lumber is about to rally and how to play it with this ETF

WOOD, one of the Ishares ETF symbols related to the Real Estate and Construction sectors may become the next hottest instrument for skilled technical traders.  Over the past three years, Wood has rallied over 110% between a $40 to $84 range and the trading volume of WOOD has been relatively consistent near an average of about 140k shares per week.  Let’s dig into the opportunities that may present themselves over the next 6 to 12+ months in WOOD.

First, you can get more information about this iShares ETF here.

Second, the WOOD ETF is relatively closely correlated to the US Real Estate and Construction sectors. Thus, when economic data is announced that supports growing Real Estate and Construction activity, traders can easily translate that into forward expectations in price in the WOOD ETF.  For the purposed of this article, we’ll stick with a simple example of New Private Housing Unit Building Permits data from the St. Louis Federal Reserve.

Before you continue, take a couple of seconds and join our free trend signals email list.

NEW HOUSING BUILDING PERMITS

As you can see from the chart below, since the bottom of the housing market crisis in 2009, an extended bottom to place between 2009 and 2011.  Early in 2012, the housing market began to uptick with an increase in housing permits.

This increase continued until a peak in 2015 rattled the markets (right before the 2016 Elections).  The post-2016 recovery and rotation in housing permits are very clear to see through the end of 2018 and we can see an uptick in new building permits in 2019 as the US Federal Reserve change focus fairly early in 2019 to reduce the Fed Funds Rate and ease economic concerns globally.

This uptick in the housing permit data presents a fairly clear picture that builders are expecting a moderate increase in activity over the next 12+ months related to new home sales, inventory, and activity.  How can you learn to profit from these trends?

WOOD WEEKLY PRICE CHART

This Weekly WOOD chart highlights the trends that correlate to the housing permit chart above.  Notice how the growth from 2013 to 2015 was more moderate compared to the growth between 2017 and 2018?  This reflects the investor sentiment related to real economic activity and expectations.

In the 2014/2015 period, housing prices were still recovering well, yet the US Fed was also starting to raise interest rates from extreme lows and the US was headed into a very contentious election cycle.

You can see how WOOD contracted in 2016 as rates crept higher and the US election took hold of the markets – causing uncertainty and fear in the consumer market.  This fear translated to a slowdown of activity and expectations in the housing market that reflected a price decline in WOOD in 2016.

The rally, after the November 2016 US presidential elections, clearly illustrates that investors and consumers believed the new US President would usher in an economic boom cycle – no matter what the US Fed did (for the most part).

Currently, WOOD has retraced from $84 to levels near $54.  The current uptick in housing permits suggests builders and construction are ramping up expecting a bump in housing activity over the next 12+ months.  It could be that builders are expecting the US Fed to continue easing or a more positive business/political climate for consumers and wages.  Either way, the uptick in building permits suggests forward expectations are positive at this time.  If WOOD breaks above the $67/68 level, a new price rally may continue towards the $76 level.

DAILY WOOD PRICE TARGET CHART

One of our favorite measures of price activity is the “100% Fibonacci Measured Move”.  This Fibonacci price theory suggests that price typically legs higher or lower in 100% (or near 100%) legs/moves.  By taking a look at a previous price advance/leg, we measure that move and apply that range to a recent pullback to determine where the next 100% Measured Move may target.

In this case, the $76.40 level becomes the new 100% Fibonacci Measure Move target if the upside breakout happens as we expect.  This represents a 15%+ upside price move potential for skilled technical traders.

If wood starts to collapse in price, it could be the start of the next real estate crash we explain here.

We’ve been warning our followers and members that 2019 and 2020 are going to be excellent environments for technical traders.  Price rotation, trends and volatility should continue throughout the next 12+ months and well past the 2020 US elections.

Following wood/lumber may be new to you and that’s great because its another angle to profit from an asset class, not many traders talk about. We will also go into more detail in a future article on how we use the wood to gold ratio to help predict stock market direction. This may sound strange but, but this ratio plays a powerful roll in knowing when the big and smart money is rotating into the risk on/off asset classes.

In fact, both WOOD and Gold have bullish price patterns and one of them will fail, the question is which one? A couple of days ago we posted our analysis about what is happening in gold right now.

In short, rotations in ETFs, such as this potential move in WOOD, will continue to set up and rotate throughout the 2020 election event and beyond we’ll keep you informed as this plays out with Wealth Building & Global Financial Reset Newsletter. Join us with the 1 or 2-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial markets and build wealth while others lose nearly everything they own during the next financial crisis. Get a Free 1oz Silver Round or Gold Bar Shipped To You as a Bonus!

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

Chris Vermeulen
Founder of Technical Traders Ltd.

About To Relive The 2007 Real Estate Crash Again?

Does history repeat itself?  Are price patterns and chart patterns reliable enough to suggest that a global Real Estate market collapse may be set up?  What would it take for another Real Estate collapse to take place in today’s global market?

First, let’s start with this simple chart highlighting the “Bear Flag” setup from 2007 and the current 2019 Bear Flag setup.  This price pattern was enough of an early warning sign for our research team to run into our offices and tell us of the exciting pattern they just identified regarding Real Estate and what they thought could happen.  We listened to them share their ideas and concepts of how we have 11 months to go before the 2020 US Presidential election takes place and how higher risk delinquencies and foreclosures are starting to spike.  They suggested the political theater of the global markets and US election cycle will likely distract from the weakening economic cycle which could present enough “smoke and mirrors” to keep investors’ attention away from this potential collapse in the housing market.

Much like a magician attempts to distract you just long enough to pull of their new trick, could the political theater, global economic news cycles and the never-ending battle in Washington DC be just enough of a distraction that skilled traders miss this critical setup?  We hope not.

The peak that occurred in 2007 setup about 19 months before the 2008 Presidential election took place.  The 2019 peak occurs about 13 months before the 2020 Presidential election.  In both instances, a highly contentious political battle is taking place which may distract traders and investors from really paying attention to the underlying factors of the global markets.

A real estate crash is no something to dismiss. For most of the people, their home is the nest egg, or their largest investment and watching this asset tumble in value 10, 20, 30% or more is serious. Before you continue, take a couple of seconds and join our free trend signals email list.

2007 VS 2019 REAL ESTATE MARKET TOPPING FORMATIONS

Recent economic data suggests that builders and permits experienced an increase over the past 60 days – which is vastly different than what happened in 2006-2007.  By the time the Bear Flag had setup in IYR in 2007, new building permits had already started to fall dramatically – for at least 12+ months prior to March 2007.  Currently, the number of building permits on record is sitting near 50% of the range established between 2000 and 2009.

We authored a number of research articles this year that more clearly highlight our expectations:
– PART II – Is The Fed Too Late To Prevent A Housing Market Crash?
– Are Real Estate ETFs the Next Big Trade?

The recent increase in building permits could indicate a euphoric level of buying/flipping by builders and speculators thinking “its easy to make profits flipping these homes in this market”.  Much like the euphoric activity before the 2007 crash.

The collapse that happened after the Bear Flag setup in IYR in 2007 resulted in a dramatic -73% decline in value over a very short 24 month period.  Could something like this happen again in today’s market?

Our research team raised a couple of interesting points relating to the potential for a “rollover” type of event taking place over the next 12+ months.

First, the US Presidential election cycle could setup a very real fear that a new president could attempt to derail/damage the marketplace with new policies, taxes and other unknowns.

Second, the current Real Estate market has experienced real price growth for almost 10+ years since the 2009-2010 bottom and wage earners may already be priced out of certain markets – reducing overall demand at current price levels.

Third, a lot of recent news has been published showing massive amounts of people moving away from larger cities/states like New York, California, New Jersey, Chicago, and other locations.  These people are moving away from higher taxes and housing costs and trying to move to areas that are cheaper and quieter.

Forth, there are an estimated 40+ million “baby boomer” homes that must be liquidated over the next 10+ years as these people/families transition into elderly status.

The reality is that unless price levels revert to levels that make housing more affordable or earnings levels dramatically increase over the next 3+ years, the price level for homes in the US and Canada is already historically high.

2007 REAL ESTATE HOUSING SELLOFF

REAL ESTATE PRICES/VALUATION TESTING 2007 EXTREME HIGHS

How high?  Take a look at this last chart of IYR and pay attention to the fact that current price levels are already at the historic high price levels from 2007.  This should tell you almost all you need to know.

Unless earning levels somehow rise dramatically over the next 24 to 36+ months, housing prices are already at or near peak levels for most consumers – even if the US Fed decreases interest rates another 25 to 50 bp.

The other thing to consider is what type of new policies, taxes, costs would a new US president do to the housing market and global stock market?  What would happen in Bernie Sanders or Elizabeth Warren were to suddenly take the lead in the polls wanting to raise taxes on everyone and install new trillion-dollar policies while attacking America’s millionaires and billionaires?  Think that may have some pull on the markets?

Our researchers believe we should cautiously watch IYR for further signs of weakness over the next few weeks and months.  Yes, there is a very real potential that the US and global housing markets could collapse over the next few years – but right now we are looking at a Bear Flag pattern that may be an early warning sign of a potential price selloff.  Nothing is confirmed yet but any week now could spark the start of something ugly for home prices.

Yes, housing market economic data show some weakening while building permits and construction ramped up last month.  Housing has certainly reached a mature economic state and we believe any collapse in the global stock market could send a wave of fear throughout the housing market as people attempt to get out before prices start to collapse. We’ll keep you updated as we continue to watch the Real Estate market and our researchers pour over the data.

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

We’ll keep you informed as this plays out with Wealth Building & Global Financial Reset Newsletter if you like what I offer, join me with the 1 or 2-year subscription to lock in the lowest rate possible and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next financial crisis. Join Now and Get a Free 1oz Silver Round or Gold Bar Shipped To You!

Chris Vermeulen
Founder of Technical Traders Ltd.

Part II – Are Real Estate ETF’s The Next Big Trade?

In part I of this research post, we highlighted how the shifting landscape of the US real estate market may be setting up an incredible trading opportunity for technical traders.  It is our belief that the continued capital shift which has been driving foreign investment into US assets, real estate, and other investments may be shifting away from US real estate as tell-tale signs of stress are starting to show.  Foreclosures and price drops are one of the first signs that stress exists in the markets and we believe the real estate segment could be setting up for an incredible trade opportunity.

SRS, the Proshares Ultrashort Real Estate EFT has recently completed a unique “washout low” price bottom that we believe may become an incredible trading opportunity for technical traders.  If the US Fed pushes the market into a panic mode, sellers will become even more desperate to offload their homes and buyers will become even more discerning in terms of selecting what and when to buy.

Our opinion is that the recent “washout low” price bottom in SRS is very likely to be a unique “scouting party” low/bottom that may set up a very big move to the upside over the next 4 to 12+ months.  If our research is correct, the continued forward navigation for the US Fed, global central banks and the average consumers buying and selling homes is about to become very volatile.

If SRS moves above the $25.50 level, our first upside Fibonacci price target and clears the $24.25 previous peak set in April 2019, it would be a very clear indication that a risk trade in Real Estate is back in play.  Ideally, price holding above the $21.65 level would provide a very clear level of support negating any future price weakness below $21.50.

This weekly SRS chart highlights what we believe to be the optimal BUY ZONE and the upside price targets near $28 to $29.  Since the bottom in 2009-10, after the credit market crisis, we have not seen any substantial risk in the Real Estate market for over 8+ years.  Now, though, it is our opinion that this risk trade is very real and that technical trader should be aware of this potential move and what it means to protect assets and wealth.

If our research proves to be accurate and any future move by the US Fed will prompt a “rush to the exits” by home sellers, then there is really only one course of action left for us to consider.  Either the Fed will reduce rates, buying some at-risk sellers a bit of time before a rush to sell overwhelms the markets and prices begin a fast decline in an attempt to secure quick buyers; or the Fed will leave rates at current levels where at-risk sellers will continue to attempt to offload their homes to any willing buyers before declining prices and panicked sellers start the “race to the bottom” in terms of pricing.

CONCLUDING THOUGHTS:

Real Estate has already run through the price advance cycle and the price maturity cycle.  There is really only one cycle left to unfold at this point – the “price revaluation cycle”.  This is where the opportunity lies with our suggested SRS trade setup.

We believe this bottom in SRS will result in a few more weeks of trading near price support (above $20 and below $22.50) where traders will be able to acquire their positions.  The bigger move will happen as risk becomes more evident – very similar to what has recently happened in Gold. Once that risk is visible to traders/investors, the upside potentials ($28+ to $42+) won’t seem so illogical any longer.

I can tell you that huge moves are about to start unfolding not only in real estate, but metals, stocks, and currencies. Some of these super cycles are going to last years. Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. PDF guide: 2020 Cycles – The Greatest Opportunity Of Your Lifetime

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

I urge you to visit my Wealth Building Newsletter and if you like what I offer, join me with the 1 or 2-year subscription to lock in the lowest rate possible, get a FREE BAR OF GOLD and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next set of crisis’.

Chris Vermeulen
www.TheTechnicalTraders.com

Are Real Estate ETF’s The Next Big Trade?

A subscriber recently mentioned getting into a real estate ETF so we started going over the data which may suggest the Real Estate sector could become the next big trade over the next 12+ months.  The news that the US Fed may decrease rates in an attempt to front-run global economic weakness and real estate market weakness may result in a waterfall event in local and regional real estate markets.  This type of event could become a fantastic trading opportunity for technical traders.

Recently we have been talking about the unit and very different opportunities in other physical assets like precious metals. Each metal is unique for market timing has its own personality. Our gold predictions are an eye-opener, why silver is awesome, and our most recent analysis on platinum is timely.

Overall, our research has been focused on one of the hottest markets anywhere in the US, California.  Los Angeles, Ventura County, Orange County, San Diego, and San Francisco make up the entire massive Southern California real estate market.  The California real estate market is a fairly strong indicator for weaker market segments because the number of transactions taking place across the 400+ miles spanning San Francisco to San Diego represent multiple trillions of dollars, vast segments of consumers and types of housing as well as an incredibly diverse economic landscape ranging from coastal regions, farming regions, cities, technology hubs, agriculture and dozens of others (source).

Our concern is that a rate decrease by the US Fed may be interpreted as a “move to attempt to abate fear” instead of a “move to support the markets”.  If this decrease in rates does happen and at-risk homeowners fear the Fed is trying to push buttons to adjust the consumer environment toward a “buying bias” and sellers become scared, then the race to sell faster (decreasing prices to attract buyers) may become the norm.  In other words, in an effort to support the markets, the Fed could take actions that remove the floor from the markets as sellers attempt to get the best price possible before buyers become aware of the “race to the bottom” in terms of pricing.

At-risk homeowners are under increasing pressures as pricing, income and other expenses seem to have wreaked havoc with what was a traditionally strong real estate market just three years ago.  It appears the Fed has raised rates just enough to start to show the cracks in the dam in Orange County and LA County, California.  The increasing number of blue dots, as well as the continue “price drops” in these areas, are a very clear sign that the “hot market” is now just “mildly warm and cooling fast”.  Prices are past the peak and are already starting to decline fairly rapidly.

Additionally, delinquency levels for commercial and industrial loans are starting to rise dramatically – much like what happened in 2007 – just months before the credit market crash in 2008.  Commercial and Industrial loan delinquencies rose sharply from 1.14 in Q2 2007 to 1.45 in Q1 2008 – eventually peaking at 447 in Q3 2009.  Currently, Delinquency levels are at 1.17 – up from 0.93 for Q4 2018.  If this trend continues past September, we could be looking at a very different real estate economic picture by the end of 2019 or early 2020 (Source).

CONCLUDING THOUGHTS:

Our interpretation of the US housing market is that buyers are becoming more opportunistic as they are watching the markets and watching how sellers are dropping prices in an attempt to attract a sale.  Buyers have not seen this type of activity since early 2007-08 or so when sellers were getting desperate to get out of their homes near the top of the market.  At the same time, watching how sellers attempt to push their home into the hands of buyers creates a shifting dynamic in the Real Estate market.  All the sudden it went from a seller’s market and is now shifting into a buyers market.

The rates of delinquencies, consumer confidence, and levels of disposable income all factor into the market’s reactions to price and sales activity.  When buyers believe it is opportunistic to buy, they will move mountains to attempt to acquire a home or an asset.  When buyers believe it is not opportunistic to buy an asset, they will likely decide to wait for a more opportunistic time to make their purchase.

In part II of this article, we will share our research that highlights the incredible trade setup related to the Real Estate market and how technical traders can position their portfolios for this move.

I can tell you that huge moves are about to start unfolding not only in real estate, but metals, stocks, and currencies. Some of these super cycles are going to last years. Brad Matheny goes into great detail with his simple to understand charts and guide about this. His financial market research is one of a kind and a real eye-opener. PDF guide: 2020 Cycles – The Greatest Opportunity Of Your Lifetime

As a technical analysis and trader since 1997, I have been through a few bull/bear market cycles. I believe I have a good pulse on the market and timing key turning points for both short-term swing trading and long-term investment capital. The opportunities are massive/life-changing if handled properly.

I urge you to visit my Wealth Building Newsletter and if you like what I offer, join me with the 1 or 2-year subscription to lock in the lowest rate possible, get a FREE BAR OF GOLD and ride my coattails as I navigate these financial market and build wealth while others lose nearly everything they own during the next set of crisis’.

Chris Vermeulen
www.TheTechnicalTraders.com