Powell's Jackson Hole Speech will Decide the Trend of the US Real Estate Index

The day of high action and drama for the Dow Jones index is here.

We have action packed economic data to be released, followed by US Fed chairman Powell's speech at Jackson Hole Economic Policy Symposium 2022.

The speech is scheduled at 7:30 PM IST.

Wall street is expecting the speech to be largely focused on the interest rate decision, steps to fight inflation, and falling home prices.

The rally in crude oil and metal prices lead to higher inflation while the steps to control inflation via rising interest rates, is putting pressure on real estate stocks. The Dow Jones Real Estate index is trending southwards.

Technical View

The chart below is for the Dow Jones Real Estate Index (REI) Futures traded on Chicago Board of Trade (CBOT).

Dow Jones US Real Estate Index Futures

 

REI gained 35% in 2021 and ended the year at all-time high.

But 2022 was bad for most asset classes. Real estate took a beating along with the economy. The REI index fell over 25% from its high and is currently down by 15%.

The breakout from 1Q 2020 witnessed a stellar rally but it faded and slipped below the breakout levels signaling the fake-out.

The resistance lines (marked in red) are the selling levels for the index and bears have grabbed the opportunity around US$ 400 mark.

Death cross, the bearish technical pattern when the short-term moving average (50 days) crosses below the long-term moving average (200-days), signals the instrument is in the sell-on-rise mode.

Going by the basic Dow Theory, the lower-high lower-low structure indicates the bears are in control of the trend.

Apart from the interest rate speech, the comments on real estate will also be important during Powell's speech.

As it will be the weekly close tomorrow, the close above US$ 400 will confirm the bullish reversal as it forms the tweezers top around the US$ 400 mark.

NYSE Real Estate Select Sector Fund SPDR Fund

 

Th NYSE Real Estate Select Sector Fund SPDR is bearish.

The price breaks down from the toping pattern called head and shoulders pattern in May 2022. Sell in May and go away works well here.

An unwinding from longs was witnessed by huge volumes in the below panel confirming the top is in place.

There was an attempt by bulls to take it higher, but bears grabbed that opportunity at retest of head and shoulder as it offered low risk-high reward trade setup.

The southwards momentum confirms the bearish trend.

In case there are no positives on the real estate sector in Powell's speech, I believe the US Real estate sector will be a dumb investment in 2022.

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