Predatory Lending = Collapse

The Top, Is In

Just like the last bubble but worse.

That’s the assessment from agents in the field on the imminent real estate implosion.

Interest rates have risen dramatically, applications have evaporated, properties not moving as before, prices are dropping, lenders deploying the last resort; Adjustable-Rate Mortgages (ARM).

When the ARMs, show up in force, it’s over.

Technical & Fundamental

Over the past several days, the real estate situation has been assessed from both a technical (chart) perspective as well as the fundamentals.

The bottom line (below), is so long, it may have to be covered in several posts.

  • On a weekly and daily close basis, IYR has contacted underside resistance.
  • On a weekly and daily close basis, IYR has contacted the right side of a downward trading channel.
  • Multiple gap-fills at IYR, 91 and 94. Volume declines over – 22.5%, on the second gap-fill.
  • Multiple rising wedge breaks on multiple time-frames signal a potential drop of – 41.5%, from current levels.
  • Trading volume contracting (as price is rising) on multiple time frames, indicates potential lack of trader commitment to higher prices.
  • Financial press gets in the game (with several reports), saying ‘now is the time to buy’.
  • As highlighted above, once the Adjustable Rates dominate, the top is in.
  • This top may be far worse than ’07 – ’08, as debt levels are much higher, consumer is tapped-out and there is a massive ‘elephant’.
  • That elephant is now going mainstream with the resultant effect of unprecedented population decline/disablement.

So, let’s get started.

Real Estate IYR, Weekly Close

Un-marked chart.

Test of underside resistance

Zoom of underside contact.

Right side trendline.

Zoom of contact points.

Trading Channel

Wedge Break: Daily Chart

Zoom of break and test

Wedge Break: Weekly Chart

Note:

A measured move to 55-area, gets IYR, back to 2020 lows. That’s a reasonable expectation for an initial leg down.

If we use Prechter’s assessment concerning bubbles (manias), price action eventually retraces every bit (sometimes more) of the entire bubble move.

That puts the ultimate destination of IYR, somewhere in the vicinity of 14.0, or lower, representing a decline of – 88%.

Closing Argument

Remember this gold breakout?

It was going to be $3,000/oz., in months, not years.

Gold-O-Mania was coming. You could even sign up and pay money to read the group-think of the imminent launch.

Well, obviously at this point, $3,000/oz., is nowhere in sight.

Gold (GLD) is even lower now than it was then. On top of that, the ‘changing of hands’ assessment has not been negated; prices continue to grind lower.

Having the financial press cheerlead at the exact wrong time, is an (almost) necessary component to identify a lasting reversal.

As we can see here and here, the financial media’s position is, we’re heading higher. There is ‘real buying’ (whatever that is) for the first time in weeks.

However, from the chart evidence presented above (and we didn’t even get to ‘gap-fills’, ‘multiple wedges’, ‘contracting volume’ … maybe later), it’s hard to present that price action will somehow move significantly higher.

Price action behavior above, appears to point to an immediate or very near-term downside reversal.

Summary

Lastly, we have this from Activist Post: Real estate housing crash in progress.

Be careful. If you read the article, can you see the ruse?

It’s been discussed before on this site. That is, the real purpose of the Fed.

All is going according to plan.

Stay Tuned

Charts by StockCharts

Note:  Posts on this site are for education purposes only.  They provide one firm’s insight on the markets.  Not investment advice.  See additional disclaimer here.

The Danger Point®, trade mark: No. 6,505,279

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