Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Have The Commercial Real Estate Stocks Bounced Too Far In February?

|Includes: IYR, Simon Property Group, Inc. (SPG), VNO

In late December 2009, one of the clues that the major stock indexes were going to decline in the month of January 2010 was the commercial real estate stocks. Leading commercial real estate stocks such as Vornado Realty Trust (NYSE:VNO), and Simon Property Group (NYSE:SPG) headed the rally in 2009 and forshadowed the decline January 2010.

Many traders and investors have thought throughout 2009 that commercial real estate was going to be the next shoe to drop on the stock market. However, that was not the case in 2009 as these stocks not only held up well, but, actually outperformed. In late December 2009 these stocks started to show weakness. The ishares Dow Jones Real Estate ETF (NYSE:IYR), which is a basket of many different real estate companies rolled over at the same time and confirmed that the January decline was industry specific and not company specific.

Now we are back at interesting levels again for most of these commercial real estate stocks. Currently the February move higher has been nothing short of impressive for commercial real estate and the overall stock indexes. However, it has lacked several factors for a sustaining rally. Many of these stocks in this commercial real estate group are trading below their daily 50 moving average. This is something that many institutional traders watch very closely. Then the volume on this rally in February has been somewhat on the weak side. This is also another sign that many institutional traders will take note of. The last factor that we have noticed is that this industry group is now trading into good retracement levels which will usually serve as good resistance area.

These stocks and this sector have been excellent stock market barometers over the past year. The commercial real estate sector is now nearing a very important level. If these stocks start to fall soon the overall market may not be too far behind. Today these stocks are behaving just fine, however, this type of action could change on a dime and might be worth monitoring.



Nicholas Santiago
Chief Market Strategist
InTheMoneyStocks.com