ONE-TWENTY TWO: Trading Financial Markets
Since the year 2000, delivering a different narrative for students and fans of financial markets: stocks, options, currencies, Bitcoin, and more…
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 The weight of deteriorating market breadth was undermining the stock market even as on-going rotations kept the indices floating higher. Last week, the tone made one of those periodic, yet still small, shifts. When news broke that Epic Games won a key provision of its lawsuit against Apple and its Apple Store, … 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
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
Stock Market Commentary A week ago, the fading of the growth tantrum further solidified my bullish read on the stock market. Last week, big cap tech took over from the growth tantrum. Buyers passed the baton in impression fashion but left small caps behind. Regardless, market dips are attracting buyers in a rotating fashion. The … Read more
Just as I was going about to close the books on the seasonal trade in home builders, Lennar (LEN) revived upward momentum across home builders. LEN gained 13.8% after announcing a partnership with Centerbridge to invest in rental single-family housing. News of the “Upward America Venture” lit a fire across the sector. However, the excitement … Read more
Stock Market Commentary A great stock market divergence clarified itself last week. Growth stocks, especially the expensive and/or speculative kind, took a back seat to industrial and consumer names and other stocks primed to benefit most from the global economies reopening on a fresh wave of liquidity. This divergence renders a generalized view of the … Read more
Mortgage rates are on the rise following record high lumber prices. Together, these measures are starting to weigh on the stocks of home builders. 30-Year Mortgage Rate The 30-Year fixed rate mortgage average in the United States hit 2.97% on Thursday, February 25th. Not only is this rate a 6-month high, but also the rise … Read more
If the housing market remains strong through 2021, Meritage Homes (MTH) may be one of the best catch-up trades in the cohort of major home builders. MTH hit an all-time high 4 months ago in October. Since September, MTH’s valuation has dropped from 2.0 (expensive!) price/book to 1.4, 1.1 price/sales to 0.7, 12.8 to 8.1 … Read more
“We are confident our positive trajectory will continue as not only did our fourth quarter net new contracts increase 45% over last year but we have seen our sales pace accelerate, with December up 54% and January increasing 77%. We are solidly positioned with a backlog of 3,439 sold homes, an increase of 66%, along … Read more