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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.

Vix Warns Of Imminent Market Correction

The VIX is warning that a market peak may be setting up in the global markets and that investors should be cautious of the extremely low price in the VIX.  These extremely low prices in the VIX are typically followed by some type of increased volatility in the markets.

The US Federal Reserve continues to push an easy money policy and has recently begun acquiring more dept allowing a deeper move towards a Quantitative Easing stance.  This move, along with investor confidence in the US markets, has prompted early warning signs that the market has reached near extreme levels/peaks. You can get all of my trade ideas by opting into my free market trend signals newsletter.

VIX VALUE DROPS BEFORE MONTHLY EXPIRATION

When the VIX falls to levels below 12~13, this typically very low level is usually associated with an extreme peak in price.  Throughout history, after the VIX has collapsed to these types of low price levels, the markets have a tendency to revert/correct in ranges that are typically in excess of 3.5% to 5.5%. In some cases, these corrections have been as large as 11% to 18% or more.

CURRENT CONTINOUS VIX PRICE CHART

The current VIX level, near 12, is near the lowest historical levels of the past 12 months.  Every time the VIX has fallen to near these levels, a peak in price has set up within just a few days potentially.  Each time this setup has occurred, the price has rotated/corrected downward by at least 5.5%.  Is that about to happen again in the US markets?

CUSTOM MARKET CAP INDEX

Our custom Market Cap Index is also suggesting a market peak has setup and that price may likely revert to lower levels. Historically, when the price reaches these extreme price ranges, a rotation/reversion price event takes place.  We believe a price reversion may be setting up in the US/Global markets that traders may not be prepared for.  The current rally in the US stock market suggests a broader market rotation may take place.  This suggests a deeper reversion event may be setting up.

Last week I talked about the 3-year record high outflows in the GLD gold bullion ETF and how it’s warning us that investors are not fearful of falling stock prices. This along with the vix, and our custom index paint a clear contrarian signal that a top is near!

CONCLUDING THOUGHTS:

As we near the end of 2019, the current bullish price trend may come to a dramatic end as the VIX charts and our custom Index charts suggest the US/Global markets may have reached levels that support a price rotation/reversion event may be setting up.  Traders need to be prepared for the risks associated with such an event and plan for extended risks.

If you find this type of analysis interesting be sure to video my website to learn more about how you take full advantage of this analysis every week at www.TheTechnicalTraders.com

Chris Vermeulen
Technical Traders Ltd.

US Stock Market Hasn’t Cleared The Storm Yet

As much as we would like to report that the US Stock market has recently cleared the future concerns of a global economic recession as well as expanded into a new growth phase, we simply can’t make that claim give the data we are seeing from our proprietary price modeling systems.  Overall, this final quarter of 2019, and early into 2020, may shape up to be a very volatile period in the global markets.

Before we get into the details, be sure to opt-in to my Free Market Forecast and Trade Ideas Newsletter so stay on top of these market moves.

Recently, we posted a research post highlighting the price structure of the ES and TRAN charts that continue to suggest price weakness is still driving overall price rotation.  The TRAN chart is very telling currently as it shows much more substantial price weakness in comparison to the ES, NQ, and YM charts.  We believe the continued price strength is seen in the ES, NQ, and YM charts is related to the continued “Capital Shift” where foreign investors are still pouring capital into the US markets believing they are the safest and most secure investments for the future.

The divergence between our custom indicators and market analysis tools in relation to the support in the US major markets (the ES, NQ, and YM) continues to present a very interesting dynamic regarding the future expectations of true price value.  Either the US major markets are overvalued in relation to price weakness shown by other factors (our custom indicators and modeling systems) or our custom indicators are undervaluing the strengths of the “capital shift” process that is taking place throughout the globe.

In our opinion, the single most important aspect of true technical analysis and price structure is that price MUST confirm a renewed upward price trend/bias before we can consider the risks of a price correction invalid.  At this time, we don’t believe we are “Out Of The Woods” yet in terms of identifying this type of upside price validation – let’s take a look at some charts.

This Custom Smart Cash Index Weekly chart highlights the recent upside price swing related to the multiple news events from last week (BREXIT, China & Earnings).  We can see how price briefly broke through the lower channel of historical price trends and appeared to be setting up a potential breakdown event.  Yet, the news items last week resulted in a “reprieve” upside price move that pushed our Custom Smart Cash Index back into the lower channel range.

Obviously, this move does not constitute a new Bullish price trend based on the data from this chart.  We have yet to break the downward price cycle, highlighted by the BLACK trend line, as well as the Price Weakness Zone, highlighted by the RED SHADED area.  Ultimately, if the global markets were to break this downward price channel to the upside, then we would have some technical confirmation that a new bullish rally is really taking place.  As of right now, we don’t have that type of confirmation.

This Custom Price Volatility Channel Index Weekly chart highlights another concern we have related to the future capabilities of any real upside price move.  Remember to keep in mind the data from the Smart Cash Index chart as we move forward through this analysis.

The Custom Price Volatility Channel Index chart is showing that price has “recovered” back into the normal price range zone (the center green zone).  In fact, the upside move last week put this Custom Volatility Index value into the upper “normal” price zone and into a “Weakness Channel” which is where early price “topping” formations typically occur.  The Extreme Peaks level is where the ultimate high price top happens.  The Weakness Channel is where price initially runs into the first levels of resistance and begins to become more volatile – at least recently.

We’ve highlighted a number of deeper price rotations in MAGENTA that shows what we believe may be setting up in the US/Global markets right now.  In the past, we’ve witnessed these types of “brief recoveries” in the Volatility Channel Index a number of times just before a deeper price move breaks out pushing the price towards an ultimate low price rotation.

You can see the first example of this in February 2018, where a very deep low price level was reached, followed by a reprieve, then another attempt to reach new lows in April 2018 (the ultimate bottom).  And again in October 2019 as the price began the downside move that ended near Christmas 2019.  The initial downside move pushed the Volatility Index very near to the lower price channel levels, then a brief reprieve happened, then another deeper price move toward the ultimate low/bottom.  This pattern continues even with the minor price rotation in April 2019.  The initial downside move reached into the lower volatility zone pauses then rotates back into the lower zone to set up the “ultimate bottom” in early June 2019.

What will this current rotation look like if it follows the same pattern?  From these current levels, it would have to collapse back into the lower price channel (possibly below it) and would attempt to setup an “ultimate price bottom” at some point in the future?

This begs the question – are we just starting a bigger breakdown event?

The VIX, S&P Volatility Index, Weekly chart continues to tighten below 20 – which is an extremely high level historically for the VIX.  In the old days, just a few months back, we would consider a tight VIX somewhere below 11 or so.  Now, it is below 15~20.  Volatility is certainly increasing as price range and rotation have increased.

Still, our proprietary Fibonacci Price Amplitude Arcs suggest a major inflection point is set up to happen near the end of September (the week of September 30).  These price amplitude arcs are based on a combination of Fibonacci price theory and a Nikola Tesla theory called “Mechanical Resonance”. Tesla’s theory was that all things operate as energy and because of that – all things have a natural resonant frequency and amplitude level.  If we are able to tune into that frequency and amplitude level, then we will be able to harness the power of that item and the associated items around it.  This is because all things are related to the energy produced by surrounding items.  It may be tough to understand right now – but try to think of it as the “hidden resonant frequency and amplitude of price action”.  Look at the arcs on this chart and try to see how the peaks, trends, and troughs align very closely with these arc levels.

What this means is that September 30 is setting up to become a potentially big inflection point for the VIX/major markets.  Prior to that time, we would expect the VIX to prepare for this inflection point by attempting to “base” near true levels.

Lastly, our Custom Metals Index Weekly chart.  A number of technical conditions are setting up in this chart – first, the resistance near 68 has set up a double-top pattern.  Thus, if metals continue to push higher, once this chart breaks the 68 level, we could see a very big move to the upside.  Second, the Fibonacci Price Amplitude Arcs are continuing to align with the September 30 inflection point.  Therefore, we have further evidence that the end of September could become a very interesting opportunity for skilled technical traders.  Lastly, we believe the upward slope highlighted by the GREEN trend line is the key support level for this Custom Metals Index.  Therefore, looking for opportunities to find new Long Entries near or below this level would be ideal.

If our analysis is correct, precious metals will continue to rally well into the end of 2019 and into 2020.  Timing these trades are critical.  The volatility of the metals markets has increased by nearly 100% from earlier this year.  This means bigger risks and bigger profits as the price range has nearly doubled in the average range.  Pay attention to these opportunities as they set up and please be cautious of “loading up” because of any one trigger.  This is a market where skills, risk management, position sizing and timing your trades are going to make a big difference for you.

CONCLUDING THOUGHTS:

In closing, we believe we are not out of the woods just yet.  We believe the price movement near or after September 30 will be key to understanding what will happen throughout the remainder of 2019 and into 2020.  If our analysis is correct, we believe the price trend set up on or after the September 30 inflection point will prompt a very big price move in the global markets.

Play it safe right now.  Don’t get over-confident in your trades and learn to manage your risks accordingly.  It is very likely that we are going to see a bit of price consolidation, possibly into a Pennant/Flag formation, over the next 15+ trading days as we near the September 30 inflection point.  At this point, we have to wait and watch what happens next and watch for any early warning signs across the markets (like the Transportation Index).

Be prepared for these incredible price swings before they happen and learn how you can identify and trade these fantastic trading opportunities in 2019, 2020, and beyond with our  Wealth Building & Global Financial Reset Newsletter.

Join me with a 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 1oz Silver Round or Gold Bar Shipped To You Free.

Before we get into the details, be sure to opt-in to my Free Market Forecast and Trade Ideas Newsletter so stay on top of these market moves.

I can tell you that huge moves are about to start unfolding not only in currencies, metals, or stocks but globally and some of these supercycles are going to last years. A gentleman by the name of 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. 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.

NOTICE : Our free research does not constitute a trade recommendation or solicitation for our readers to take any action regarding this research.  It is provided for educational purposes only.  Our research team produces these research articles to share information with our followers/readers in an effort to try to keep you well informed.  If you want detailed trade signals complete with entry, targets and stop, join our trading newsletter today.

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Chris Vermeulen – www.TheTechnicalTraders.com