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Courtesy of Daniel Sckolnik, ETF Periscope
“Investing should be more like watching paint dry or watching grass grow. If you want excitement, take $800 and go to Las Vegas.” – Paul Samuelson
The markets seem to be well sprayed with Teflon, if the resilience illustrated last week offers any indication.
Demonstrations in Egypt? Nothing to see here, move along. Mixed news on the unemployment front? Par for the course. Unimpressive earnings in general? It’s all copasetic. The Bullish trend tosses all negative comers aside with a flick of its impressively pointed horns. The force seems indeed to be with the trend, which continues undeniably towards the upside, and though there have been several recent candidates offering to help shepherd along the eventual correction that certainly will come, the requisite fear required for such an action has yet to take root.
And so, the trend continues.
Last week saw the Dow Jones Industrial Average (DJIA) pivot off of the 167-point drop of Friday, January 28th, when the first real awareness of the volatile situation in Cairo seemed to affect the markets. The Dow spent last week making up the difference, and then some, gaining a total of 268 points on the week. What was really worth noting, however, was the slow but certain ascent of that Index up past the 12,000 level, one of those “psychologically important” benchmarks that is always referenced in market analysis. Prior to last week, that level hasn’t been bested in over 30 months, with the very brief exception of a pair of intra-day highs just prior to the sharp market impact of the Cairo unrest.
It will be revealing to see what occurs this week, with the earnings season revving up into full swing. 12,000 may become a solid support level, or, if a combination of earnings and geopolitical news hits hard and negative, that same level could seal up firm like the cap on a pyramid and become a strong point of resistance.
Of the many sectors that have been enjoying the ride on the trend train over the last five months, one particular group may tend to surprise those who haven’t been paying attention.
Can you say Real Estate?
Well, maybe not the real estate markets in general, though specific areas have done better at recovering from the damage of ’08 than others. Rather, quite a few of Real Estate Investment Trusts, better known as REITs, have done quite well over this period. A number of REIT ETFs have performed exceptionally since September, and if you have thoughts of catching real estate on the rebound, but haven’t figured out how to go about it, REIT ETFs may still have some juice left in them, particularly if the economy rebounds and people actually start to purchase homes and commercial real estate to a significant degree.
Here is a pair of REIT ETFs to consider to the upside, and a single “ultra-short” ETF to contemplate for taking advantage of any downside action in the sector.
IYR (iShares Dow Jones U.S. Real Estate Index Fund) tracks the Dow Jones U.S. Real Estate Index, and measures the performance of the U.S. equity market’s real estate industry. IYR has gained 15% since September, and is also hitting its 30-month high, holding well above both its 50-day and 200-day moving averages.
Should you wish to broaden your perspective to include a more global vision of a recovering real estate market, there are several ETFs that can serve the purpose. One of them is RWX (SPDR DJ Wilshire Intl Real Estate), which tracks the Dow Jones Global ex-U.S. Real Estate Securities Index. It is designed to measure the performance of publicly traded real estate securities in developed and emerging countries, excluding the United States. Over the period of the last five months, RWX has gained over 20%, and now seems to have established a solid support level over and above both its 50 and 200-day moving averages. It currently stands at its 30-month high.
For those who remain doubting Thomases about the state of the U.S. real estate market, hop on board this train where you can ride down hard and fast should the markets fail to improve sufficiently. SRS (ProShares UltraShort Real Estate) tracks the Dow Jones U.S. Real Estate Index. It roughly corresponds to twice (200%) the inverse (opposite) of the daily performance of the Dow Jones U.S. Real Estate Index. As noted, it is an Ultra-Short ETF, meaning you buy it if you think the markets are going down. Shorting it means you think the markets are going up.
ETF Periscope
Full disclosure: The author does not personally hold any of the ETFs mentioned in this week’s “What the Periscope Sees.”
Disclaimer: This newsletter is published solely for informational purposes and is not to be construed as advice or a recommendation to specific individuals. Individuals should take into account their personal financial circumstances in acting on any rankings or stock selections provided by Sabrient. Sabrient makes no representations that the techniques used in its rankings or selections will result in or guarantee profits in trading. Trading involves risk, including possible loss of principal and other losses, and past performance is no indication of future results.
