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...Most disturbing of all is the action in the chart shown below, plotting the Dow Jones Real Estate ETF, revealing yesterday’s full-blown technical breakdown, downside directional reversal in the longer-term 200-Day EXP-MA, and deepening negative reading in the med-term ROC. 



I say most disturbing, as relates to the Dow Jones Real Estate ETF breakdown because the IYR contains a significant commercial real estate element, and the commercial market has held up quite well relative to the residential market… until now.

The dominos appear to be lining up, from sub-prime lenders to mainstream blue-chip investment banks and the entire financial sector, along with residential real estate right down the line to the commercial sector. The longer-term weekly chart of the IYR, seen below, is truly the most ‘disturbing’ as it relates to the entire equity market, the financial sector, the business sector, and the US consumer-homeowner.



Turn out the lights, the party’s over and the IYR is breaking down on an outright basis. And more tellingly, relative to the broader equity market as defined by the S&P 500, evidenced in the weekly Ratio Spread chart on display below. Note the violation of the secular 2-Year EXP-MA and negative reading in the long-term 2-Year ROC, the first such combo in years.



And, as if things were not ‘bad’ enough, the market is already suggesting that any move by the Fed to ride their monetary white horse to the rescue of Wall Street will be met with stiff resistance by vigilante-ism from within the bond market. Note the steepening in the US Yield Curve.

Indeed, I might go so far as to suggest that a steepening US Yield Curve would be symptomatic of a tectonic shift in risk assessment, and could coincide with a widening in historically tight credit spreads. Within the daily chart below I spotlight the interplay between the two key med-term moving averages, as the 100-Day EXP-MA has crossed above the longer-term 200-Day EXP-MA, ending a multi-year trend towards inversion.



With food prices soaring, grains at multi-year highs and Crude Oil seemingly poised to bust out to the upside above $70 per barrel, the market is suggesting that the Fed is frozen for the time being. Moreover, once the Yield Curve reverses direction, as defined by the 52-Week EXP-MA, there is a strong tendency for the new trend to last for years.



From the longest-term perspective as evidenced by the monthly chart on display below, the US Yield Curve has reversed its trend, and strongly suggests that a new multi-year trend towards ‘steepening’ is already underway. Note the rarity of directional reversals exhibited by the 12-Month EXP-MA, which has just turned to the upside.



‘Telling’ is the parallel ‘reversal’ taking place in the mid-curve spreads, as evidenced in the weekly chart shown below, plotting the 5-Year Note yield against that of the 2-Year Note. Observe the breakout, and the supportive trend reversal executed by the long-term 52-Week EXP-MA, as this portion of the curve emerges from inversion.



Also of interest is the action in the Eurodollar Deposit Rate ‘strip,’ and the violent reversal seen over the last month whereby the deferred contracts have seriously underperformed (price wise) the front end.

Indeed, I note the move exceeding fifty basis points, in exactly one month, from May 7th, to June 7th, amid thoughts that any move by the Fed to rescue Wall Street reflation jeopardizes a monetization of price inflation that is intensifying within the food and energy sectors.



As the nightclub begins to empty, with last call long past and the punch bowl having run dry, I am increasingly interested in pursuing:

• bearish stock market strategies
• yield curve steepening strategies
• credit spread widening strategies
• volatility expansion strategies

This as an addition to my existing grain and energy price inflation strategies.

Turn out the lights, the party is over. This ain't no fooling around!!!