DXY, AUD, Soybean and IYR (real estate) analysis: Will Real Estate crash? [Video]

The University of Michigan consumer sentiment index fell to 73.2 from 78.1 in July. However, this data has a short-lived impact on the market. Talking over middleterm, we have a good setup in this market – commercials are long, the evaluation index shows the dollar is undervalued, but time matters a lot in this business. We have to get price action confirmation. I would like to see ‘wash-out low’ before a rally starts. Besides, we have a clear trendline on the daily chart, and breaking above it is what we are waiting for. The most conservative traders can look for breakout and successful trendline retest before taking a trade. Till that time, continue to trade intraday using simple support and resistance levels. We have a good setup for a potential big rally, but patience is a must.

We have been long AUD, but it is time to look for and take sell signals. Based on accumulation we can see 0.73 before the decline. However, if you are long, add trailing stops. Commercials started to sell the Australian dollar. You know COT reports don’t have immediate effect. We use it only to identify the early signs of a trend change. The evaluation index also shows this currency is overvalued. It matches very well with the DXY setup.

We already talked about the coming decline in Soybean and finally, we are close to an entry. If on Monday, we break below Friday’s low to form a lower high, that’s our entry. Otherway, wait till the trendline breaks.

It has been a long time since our last ETFs discussion. Today I have something to share. IYR (US Real Estate) is getting ready for a new decline. COVID is a real disaster for an offline business. Thousands of restaurants and other retail businesses have already closed and this number will be increasing. It is a dangerous sign. With that in mind, we can experience the start of a new decline in the USA commercial real estate in the coming 2 – 3 months. Once the destruction of earning levels reflects into the economic cycles, banks will tighten lending opportunities. That means the number of capable buyers will decrease at a time when home inventories may begin to skyrocket. Does it remind you of something? – It is very similar to what happened before the 2008-09 credit crisis.

Pay attention to the Case-Shiller data. It is showing home price levels had already exceeded 2006-07 levels. So, what do we have? – Extremely high price levels, combined with the uncertainty of future earnings, unemployment, a big number of closed retail businesses, falling consumer confidence, layoffs, etc. What result can we expect? Real Estate ETFs can decline another 30 – 50%. So, if you deal with USA commercial real estate, it can make perfect sense to hedge your risks.