![According to the chart, this real estate ETF is breaking out after a long period of going nowhere.](https://news7g.com/wp-content/uploads/2024/07/108003378-1720549570144-gettyimages-2078956142-4045_32_2023_3038-780x470.jpeg)
The Select Real Estate Sector ETF (XLRE) is the worst-performing sector ETF in 2024, up about 3.5% right now. Seven sector ETFs are up more than 10% this year, and the S&P 500 itself is up 15%. For that reason, XLRE hasn’t gotten much attention. However, it has started to pick up steam recently, and the charts show more gains to come. The ETF has been a net gainer since September 22. Needless to say, hundreds of stocks, ETFs, and indexes have outperformed significantly over the past two years. But it was the best sector ETF in July, up nearly 8% monthly. XLRE has done so by being one of the most consistent SPDR ETFs over the past few weeks: The ETF has been up 14 out of 21 days through July 30. (Watch Frank’s exclusive PRO Talks on his method here.) The pullback is also extremely important from a technical perspective. XLRE is currently attempting to break out of two bullish patterns, both of which are shown on this weekly chart. If the ETF continues to trade above the breakout zone near $41, its upside targets of $50 and $45 will remain in place. As we can see, both breakouts have just occurred, as XLRE had been hovering (and failing) in the 40-41 area in the middle of the month before this recent rally. With inflation data gradually improving recently and the Federal Reserve warming up to cutting rates sooner than expected, the 10-year yield has fallen. In theory, falling interest rates should help real estate, and that’s exactly what has happened. This chart shows the 10-year yield (in green) and XLRE (in red). The vertical lines depict two major peaks in interest rates since 2023. It’s no coincidence that XLRE has recorded significant trading lows and moved higher for months at a time, including recently. After such a strong run over the past few months, the question is whether XLRE has much more momentum to run. The answer is a resounding yes… if the breakout in the SPDR S&P Homebuilders ETF (XHB) to new highs is any indication. Until the end of 2023, XLRE and XHB were fairly closely correlated. However, that changed dramatically as 2024 began. XHB continued to rise while XLRE declined until mid-April. With interest rates extended since then, both XHB and XLRE have benefited. And if interest rates continue to fall, XLRE will have strong momentum to potentially catch up with XHB again. -Frank Cappelleri Founder: https://cappthesis.com DISCLOSURE: (None) All opinions expressed by CNBC Pro contributors are solely their own and do not reflect the opinions of CNBC, NBC UNIVERSAL, their parent companies or their affiliates and may have been previously disseminated by them on television, radio, the internet or other media. THE ABOVE CONTENT IS SUBJECT TO OUR TERMS AND CONDITIONS AND PRIVACY POLICY. THIS CONTENT IS PROVIDED FOR INFORMATIONAL PURPOSES ONLY AND IS NOT INTENDED TO BE FINANCIAL, INVESTMENT, TAX OR LEGAL ADVICE OR A RECOMMENDATION TO PURCHASE ANY SECURITIES OR OTHER FINANCIAL ASSETS. THE CONTENT IS GENERAL IN NATURE AND DOES NOT REFLECT ANY INDIVIDUAL’S UNIQUE PERSONAL CIRCUMSTANCES. THE CONTENT MAY NOT BE SUITABLE FOR YOUR PARTICULAR CIRCUMSTANCES. BEFORE MAKING ANY FINANCIAL DECISION, YOU SHOULD CONSIDER SEEKING ADVICE FROM YOUR OWN FINANCIAL OR INVESTMENT ADVISOR. Click here to view full disclaimer.