One can say with confidence that American confidence is at low tide. Last week, the U.S. Conference Board’s consumer confidence index unexpectedly plunged in May, dropping from 66 in April to 60.8 this month. Analysts noted that it was the lowest reading since November, marking the second setback in the last three months.

Consumers expressed a dour outlook on what’s happening now and what may happen in the future. The “present situation” subindex slipped by almost a point to the same level as last September, while the “expectations” component took an eight-point wallop to the chin — sinking to a seven-month low, the largest smackdown since June of last year.

But just stating that confidence is poor does not do the data justice. Consumer confidence is really at a 40-year low if you exclude the financial crisis of 2008. 

So what does that mean for the equity markets?

Well, if you match up confidence lows with a chart of the S&P 500 on the same scale, you can see that these periods never coincide with market highs. They are either market lows, or midpoints before much higher ground. 

Jason Goepfert of Sundial Capital looked at S&P 500 performance after consumer confidence drops to a six-month low, under 75%, when the index is within 3% of a one-year high. He found the median return three and six months later were positive more than four-fifths of the time, with no big losses. The most recent example occurred on Feb. 26, 2010, and the market was 20% higher a year later.

As for the buying intentions question on the list, more respondents said that they are planning to buy an existing home in the next six months and buy a used car. But they were less optimistic that they would buy a new home or car. That does not do much for manufacturing or construction.

So why are consumers moping? BMO analysts point to high gas prices, the downturn in home sales and the weak job market. The S&P Case-Shiller house price index fell for the ninth straight month in March — down 0.2% for the top 20 metropolitan areas. From a year ago, BMO analysts note, that’s a 3.6% drop for the top 20, the sixth straight year-over-year decline and the steepest since November 2009. That amounts to a 5.1% y/y decline.

The report also shows that 19 of the 20 metro areas studied are still reeling from soft home prices. The worst is Minneapolis — wow, bad luck, considering their Twins also sport the worst record in baseball. Prices fell 10% from a year ago. The next worst areas hit were Phoenix, at -8.4%, and Chicago and Portland (both down 7.6%).

Now, considering that housing is so weak, and expectations are poor, manufacturing is down, and the data suggests that the world is going to hell in a wheelbarrow (can’t afford a hand basket), what sector of the market do you think rose the most last week in terms of its usual volatility — and was looking good from a chart perspective?

If you guessed real estate, you win a free market decoder ring. Despite all the apparent woes in the property world, all the major categories of real estate investment trusts broke out last week, as exemplified in the iShares Cohen & Steers Realty Majors (NYSE:ICF) exchange-traded fund.

It then came back a bit on Thursday and steadied Friday of last week. Unfortunately, the sector fell back amid the market’s decline this past week. However, it’s worth noting the ETF is still up more than 7% for the year, while the S&P 500 has now gained less than 2%.

For more guidance like this, check out Markman’s daily trading service, Trader’s Advantage, or his long-term investment service, Strategic Advantage.