Fed Announcement Pushes Real Estate ETFs to Oversold Condition

Traders reacted quickly after the Federal Reserve announced there would be no significant policy changes in the next few months. Selling was broad-based with major stock market indexes falling 1.3% or more. Bonds also sold off with iShares 20+ Year Treasury Bond (NYSE: TLT) falling 1.1% from its morning high. SPDR Gold Shares (NYSE: GLD) was down 1.3%.

Real estate was among the leaders to the downside with iShares US Real Estate (NYSE: IYR) falling 2.6% and the leveraged fund ProShares Ultra Real Estate (NYSE: URE) falling 5.3% from its highs. Price moves in URE are designed to be twice as large as the move in the Dow Jones U.S. Real Estate Index.

After closing with PowerRatings of 8, both IYR and URE are oversold heading into today’s trading.


PowerRatings are based on the relative strength or weakness of particular stocks or ETFs. The higher the rating, the greater the one week historical gain has been for stocks and ETFs with that rating. For best results, enter trades on stocks with a PowerRatings of 8 or higher with a limit order 3-7% below the previous day’s closing price. Higher % limit entries have historically shown a greater percentage of winning trades but higher % limit orders also reduce the chance of trade execution.

In the past, buying stocks with a rating of 8 on a 5% pullback the next day and selling five days later has also been profitable 72% of the time with an average winner of 3.9%. Other entries and exits also show high winning percentages and large average gains.

Despite the relatively large intraday moves in many stocks and ETFs, the broad market ended the day in neutral. As we saw yesterday, PowerRatings can help us quantify whether the market is oversold, overbought or neutral. The table below shows there are once again an unusually small number of stocks and ETFs with high or low PowerRatings.


PowerRatings of 9 or 10

PowerRatings of 1 or 2

Stocks priced > $5 7 49
ETFs 3 1
Leveraged ETFs 2 2

Despite the neutral state of the market, traders should have real estate ETFs near the top of their watchlists.

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All data is as of the end of day on 3/19/2014.