New Home(r) Sales
Happy Hump Day, traders.
The summer doldrums, along with the usual low volatility drudge, certainly seem behind us.
VIX is well off the lows, and with plenty of data rolling in, there are certainly opportunities to participate.
News of the Day
Hot off the press yesterday was a surprise miss on New Home Starts.
Real estate purchasers have seemed to find the pain point - finally moving to the sidelines, as mortgage rates rise into the 7’s. The New Home Sales data point released yesterday showed a decline of -8.7 month over month. This was a larger slide than the expected -6.7. The median home price is down 13% from the most recent highs.
Market moving data such as this seemed to have been levitating for some time. Are cracks starting to form in the ‘soft landing’ narrative? With the housing market facing headwinds and continued credit tightening, growth could be stifled.
Some data points to be cognizant of today, the 27th, and tomorrow, the 28th, are as follows. If you trade crude, ‘Wednesday’ means: time to keep your head on a swivel.
As active traders, the pickup in vol certainly has been welcome. VIX, which had been hanging out in the low teens, now has some life at 19.
The market indices are in a precarious position. With the significant slide from the recent high in SPY, an oversold condition persists into this week. This does not mean to automatically get long. On a weekly basis, SPY sits in a low volume node and could see some firmness. The area is even more pronounced in SPX. I will be watching 4273 heavily.
Being nimble is extremely important. Mixed signals can constantly be generated - as an example, the Q’s seem to be breaking down.
Red weeks typically behoove red weeks. Not always (obviously), but more downside is possible - especially if the negative news keeps rolling in. That does not mean we will be dissuaded by structure. Structure must be played by probability, keeping risk in check. Many tickers are in areas of low volumes nodes / low interest. We would be looking for spikes down, with signs of life following.
Breadth indicators are great context clues. The percentage of stocks above their 20-day moving average, and percentage of stocks above their 200-day moving average can
Source: Markets & Mayhem
Put/Call Ratio, another breadth indicator, is in no-man’s land. Market neutral strategies that take advantage of increased premium could be advantageous here until a market direction unveils itself.
We are watching a few things today:
AAPL has broken its most recent low. As stated above, the Q’s seems to be breaking down. This is always at the top of the watchlist. The indices are firming up this morning after the strong sell off of the last few days.
Keep an eye on USD which has been strong. Gold is dropping, and crude continues to be extremely strong. The drawdown at Cushing has been getting attention.
There have been murmurings of the long end of the curve steepening. The 30y rise to 4.7% yesterday - a trend that, if continues, historically is not great for stocks.
Regarding stocks, earnings releases are seasonally light (more on this tomorrow!) but there are a few names of interest. All daily charts below - as these are not names of pique attention. We still prefer to stay cognizant of any news releases, however.
MU reports today after the close. It has stayed range-bound for several weeks and should probably experience a breakout in either direction in short order. The news flow is negative in this name, especially when it comes to China. This a great company that has posted a solid 2023 (in fact, retested the yearly open and hasn’t looked back), but a heavy supply area in the $70’s seems to loom above its head.
WOR reports after the close 9/27. With the recent bullshit news from X, and decently sticky signs of long-term inflation, materials names have been a focal point of mine. This one is also at an interesting junction point structurally here as well.
JEF has recovered from the financial sector news flow earlier this year. Nothing too exciting in this name, and there is not much premium to be had. Would need to take a directional play. Not touch for me.
Lastly, tomorrow before the bell, KMX reports. With a large expected move of ~8%), premium will be heavy here. In this high interest rate environment, KMX is year another name that will be a sniff test on the consumer.
As always, trade well and good luck.
As always this is all for educational purposes only. You are solely responsible for your trades as I am for mine. Nothing contained here should be construed as financial advice, but only educational content about the markets and my particular trading style.