I received an email recently from a reader asking for my view on the REIT = XPJ = Property Sector. And if I recall correctly, he wanted a 'far out' view, or words to that effect. I am going to take that as meaning far out time-wise and also in terms of perspective.

So here we go.

My routine is mundane, but reliable. So it is firstly straight to the daily Elliott:

Chart 1

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I use a 90-day as opposed to the 300-day default for ProfitSource, but here is the default:

Chart 2

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The primary difference between the two is the extent and timing of a pullback and the extension upwards after the retreat is complete.

I feel comfortable with the scenario in either of the above charts as I do not necessarily want to fine-tune. I am happy for the moment just to accept that some level of retreat will happen and then we will see a run up possibly in January, as so often happens.

But let's look at the 'far out' perspective:

Chart 3

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Again, I don't want to fine-tune or be precise about the low. I am comfortable enough to say that there is a real prospect of a deeper low ahead.

Now, that is not a popular view and I feel as if I am out on a limb and maybe need to grow some wings to fly quick smart.

You might ask, so what is my 'fundamental' rationale? Wel, I don't think this recession is well and truly over. And as I write we are seeing data that suggests that retail spending is easing, unemployment or at best 'hours worked' are falling, interest rates will rise in the coming months and that will put some pressure on residential, retail, commercial and industrial property.

I am not gloomy and hope the worst does not happen. But all markets - including property - are priced for the best outcome and that is just too optimistic. It is a set up for disappointment for some.

More next week.

Enjoy the ride

Tom Scollon
Chief Analyst
Trading Tutors Team