Signs of bearish reversal for XLRE

I observed last year that XLP and XLRE could be leading bear sectors in the US stock market. XLP reversed it’s bearish setup and went on to print a new 52-week high this week. XLRE broke down however and confirmed my suspicion that it was printing a distribution pattern.

Overlaid with a 4-line moving averages roadmap, XLRE highly resembles DXY’s bearish reversal (in the early stage). Recall DXY’s bearish setup here, here and here.

XLRE weekly chart late 2015 - January 2018

XLRE weekly chart late 2015 – January 2018


Note these features

  1. The 4-line moving averages roadmap is made up of 13-week ema, 26-week ema, 52-week and 104-week ema. Between Q2 – Q4 last year, we see XLRE price action reacting to and complying nicely with 52-week ema so we know it is a good roadmap.
  2. This year the opposite is happening. XLRE has fallen below the roadmap and instead of acting as support, we see the 52-week ema become resistance last week.
  3. The shorter 13-week ema and 26-week ema made a dead cross which indicates a bearish reversal.
  4. XLRE expanded below Q4 low. This bearish expansion terminates last four quarters’ sequence of higher-highs and higher-lows. With this termination, we may be looking at the start of a bear trend for this ETF or at best sideway movement. This signal reinforces the observation we make based on moving averages.
  5. Parallel lines define a channel in existence since late-2016. This channel is clearly broken on the downside. There may be some pullback. Unless XLRE does a ‘regret’ by popping back inside this channel, it could be operating on a lower level for 2018.
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