ONE-TWENTY TWO: Trading Financial Markets
Exploring the poetry in financial markets for students of money and economy since the year 2000.
The seasonal trade in home builders continues to unfold more like a typical year. The iShares U.S. Home Construction ETF (ITB) peaked in May on an absolute basis and relative to the S&P 500 (SPY). Since that peak, ITB is down 12.2% while the S&P 500 is UP 3.9%. This gap is so wide that … Read more
Stock Market Commentary August was a breeze, and the stock market strolled in September. A few pebbles rolled into the path this week. The indices delivered divergent behavior which brings up familiar themes of rotation. Most notably, the rotations pressured market breadth as small caps in particular displayed fresh signs of weakness. The Stock Market … Read more
Overall Assessment I am bullish on Tri Pointe Homes (TPH). The Tri Pointe Homes Q2 2021 earnings report delivered strong results, including records for home sales revenue, pre-tax profit, and the value of the backlog. Management reported familiar themes of strong demand and constrained inventories across demographics and geographies. Margins improved as the company once … Read more
Housing Market Intro and Summary Despite more evidence of slowing conditions in the housing market, home builder stocks remained relatively resilient in August. The underlying dynamics of demand remain in place even as housing prices remain lofty and continue to conjure up images of a housing bubble for market commentators and pundits. A supportive Federal … Read more
Overall Assessment I am neutral on KB Home (KBH). The KB Home Q2 2021 earnings report delivered strong results. Management was bullish, confident and even raised guidance. Yet, investors sold off the stock to the tune of a 6.7% loss. Clearly expectations were riding high. For example, KBH was one of the first home builders … Read more
Housing Market Intro and Summary “When will the housing market crash?” I hear this question from people astounded by the housing market’s strong performance during the pandemic. The housing market is not heading into a crash anytime soon. Demand remains strong, inventories are scarce, mortgage rates are rock bottom, home buyers are in strong financial … Read more
Stock Market Commentary Welcome to the new world of “The Market Breadth.” I used the switch from AT40 (T2108) to AT50 (MMFI) as my market breadth indicator to improve the name of this blog series. The Market Breadth marks a change from a technical name that sounds like a Space X rocket to an English … Read more
Stock Market Commentary The oversold bounce last week exceeded my expectations. I did not expect the week to end with the S&P 500 and the NASDAQ hitting fresh all-time highs. Both indices seemed to offer limited upside for trading oversold conditions.The oversold bounce also disappointed me. I looked to beaten up stocks as the source … Read more
Stock Market Commentary The stock chickens have come to roost on declining market breadth. The stock market indices still generally appear fine, but an ever growing swath of individual stocks have fallen further and further behind. Last week in particular, sellers delivered an extended beating on individual stocks. The signs of waning confidence in the … Read more
The early 2000s built upon the 1990s momentum for extending home loans to as many people as possible. The drive culminated in the “ownership society” which incentivized the financial system to over-extend credit and fuel a housing bubble. That bubble collapsed spectacularly from 2008 to 2009. In the wake, builders became very wary about building … Read more