The Trend is Bending

“The trend is your friend until the end when it bends.” – Ed Seykota

The commercial real estate stocks housed in the IYR ETF have profited nicely from a generally very low interest rate environment since 2009, as one would expect. The fallout from the 2008 financial crisis was baked into the proverbial cake during the prior, legendary bear market, which gave way for the IYR to methodically grind higher for years on end. Corrections were fairly controlled and ultimately were met with strong hands to stabilize them. 

As evidence, the IYR weekly chart, below, captures the essence of a methodical uptrend even since 2013, let alone 2009. 

However, this time around we more than have a whiff in the air of higher interest rates looming. Not only were the recent Fed Minutes notably hawkish, but TLT is now threatening an abrupt rollover after a multi-week relief bounce. 

If Treasuries do, in fact, continue to roll back over, sending rates higher,  I suspect the current highlighted IYR consolidation will finally resolve lower as the multi-year IYR uptrend bends in the end. 

To advance that thesis, look at individual REITs (real estate investment trusts) such as CCI KIM O SPG, all of which have the look and feel of bearish multi-month charts at risk of rolling over after pedestrian bounces in recent weeks.  

In fact, one might argue that the individual components of the IYR paint a much more bearish picture than the IYR would currently have us believe. 

SRS and DRV are a few bearish ETFs for the sector we are eyeing at the moment, in addition to shorting Treasuries outright.