Weekly Raid #57 - Developer Delays
Happy Hump day traders.
We have a good one in store for you this morning. We have a ton of news out today and I found some interesting research yesterday that I can’t wait to share.
Let’s dive in.
News of the day
There is too much news to go line by line today so we will hit on the majors.
First is the MBA 30-year mortgage rate. This is important because housing is already in an affordability crisis. Keep an eye on mortgage rates. They are and will remain extremely important in the economic realm.
Next up are the S&P PMI numbers as well as the ISM numbers at 9:45 and 10 a.m. respectively. ISM usually takes the lead in terms of importance but they both paint an economic picture. We are looking for it to crack below 50 at this point. It may seem strange to root for a recession, but that is far better than stagflation which is the path we are currently on. Let’s take our medicine and then move on. It will hurt, it will be unpleasant, but at least we can get through it.
Today we are going to talk about home builders.
I read through a few research reports that suggest that home builders are about to start pulling out of projects that a struggling. I thought this was just a one-off event until I saw the tweet below.
I got promoted to new home sales manager a while ago for a top 10 US builder. On a rare Sunday manager call today, informed some big builders are about to start pulling out of struggling communities early. This hasn’t been done since 08,09. Leaving empty lots to the developer.
Now this is just a single anecdotal event, but when mixed with all of the stuff I have been seeing it starts to paint a picture of homebuyer land. I would not be surprised if we start to see a bunch of land start to jump up for sale. This would create a pretty disjointed reality in real estate. First actual homes would still be selling for a premium due to the fundamental lack of supply. Second, the land would be cheap as shit because developers would need to drop it to start to pay off the loans. Now equilibrium would eventually be found, but it could take a year or more at the rate real estate moves.
These are just my thoughts on what I am seeing and reading, but if you are hoping for a giant market crash to buy (much like I am), I think we are going to need a bigger credit event. I am not ruling that out, but regular supply/demand doesn’t look like it’s going to get the job done.
We are going to do something a little different on the watchlist today, I am going to be looking at some lower timeframe charts for some potential intraday trades.
NVDA is first up today. Below is a 2-hour chart and we are approaching the 50 period moving average on it. I will have the tape pulled up and will watch it for a reaction around the 50. Ideally, we would want to see the price start to pull up, buyers overtake the sellers and see some put selling hit the options tape. If we don’t see that then I will be watching to take it short back to around the 400 handle.
TSLA is next up. We are sitting at the POC and it looks heavy. But much like NVDA above I am waiting to watch the aggression on the tape and any options activity that may come through. I happen to think most of these are on a southbound express, but with TSLA you never know. So stay nimble.
Again the above two examples are just trades, they are no investment positions. The execution method will most likely be call/put spreads or ATM options. I would hold these for 25-50% before I start to scale out pretty aggressively.
Finally, ENVX is again taking a beating and I will be adding my final set of shares on the open. You should never average down into a trade if you do not already have a plan to do some. The plan has been to accumulate a few hundred to a few thousand shares, and once I grab this morning’s bundle I will be around where I want to be. Assuming we get a pop I will look to scale out of some of the shares to have capital to reload if we continue lower.
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 in here should be construed as financial advice, but only educational content about the markets and my particular trading style.