While we normally try and steer clear of the things that might happen and focus in on what actually is happening, today we have to highlight the teetering point that the real estate indexes are balanced on. It was no secret that real estate took a major blow in August, and another in September. However, neither of those really did too much damage to the longer-term real estate charts. But as of today, these stocks look like they could be on the brink of the disaster so many folks were talking about a few months ago.

We'll mostly be focusing on the Dow Jones Real Estate Index (DJUSRE). However, the Wilshire REIT Index (REW) and the MCSI REIT Index (RMZ) both show the same symptoms. That symptom is (except in the case of the MCSI index) a fall under the 200 day moving average (green). The Dow Jones Real Estate Index was knocking on that door last week, but with today's dip to 239.46, the support potential at that line has not been realized.

Beyond that, there's another important support line that's also about to be broken - the straight-line support (dashed) that extends all the way back to the middle of 2004. It's currently at 239, and we have to think that it's playing at least a small role in holding the index up today. The question is, can it continue to do so long enough for these REITS to regroup and stage a recovery move? From our perspective, it's still a little too soon to say, but we will say that it doesn't look good.

But isn't the dip under the 200 day average enough of a sell signal? Not really. We've seen this index fall under the 200 day line a couple of different times (briefly) in the last couple of years, and none of those patterns really led to much more selling. That's why we don't want to go ahead and pull the trigger here until we get some confirmation that this move will lead to different results than the last couple did. On the other hand, there is one key difference between now and then. Then, interest rates were still rock bottom and real estate buyers were insatiable. Now, interest rates are warding off potential buyers, and real estate is becoming a liability? Does that mean REITs are subject to those pressures? Yes and no. Some REITs rely on borrowing and purchasing activity to derive income, while other rely on rental income. The former types are subject to crash in the real estate market, while the other type really isn't. However, investors tend to lump all real estate together in the same category, so all of these stocks are moving in tandem. And the point is still the same - the trend is the trend, whether or not it's justified. What we see on this chart is an index that's on the verge of turning from bad to worse.

So here's the way we're planning on playing it.....wait for a close under 235 to signal the beginning of another break down. That would leave the index under the 200 day line as well as that long-term support line, without any other support in sight until 212. That's where we find the support line that extends all the way back to mid-2002, when the real estate recovery really began. Stops on this bullish bias would come with a close above the 200 day line, once and if we got that close under 235.

Dow Jones Real Estate Index (DJUSRE) - Weekly

Price Headley is the founder and chief analyst of BigTrends.com.