Author: Doug Kass

My index trades are not A Random Walk Down Wall Street — though, to some, they may seem to be based on “gut.”

To understand my moves I turn back to my mentor The Chief — who was arguably the best tape trader I have ever met.

Let’s begin with Jerry’s SS or slow stochastic. This has a longer timeframe, which takes time to develop. But, when the SS got to the bottom of the page, it is an excellent buy signal.

Jerry also invented and I use his SS RJ (and the CSJ which is a 15-minute version of it). The SS has a weekly timeline. It utilizes daily data but the highs and lows play out over a longer-term timeframe.

So, when the SS is at the bottom of the page it is as strong a signal to buy as when it is a signal to short at the top of the page. (The Chief would say that that his indicator is far better at the bottom of the page than at the top!)     

That’s all I am going to give you or The Chief would sent out a hit on me.

Position: None 

Wolf Street howls about the record low in pending home sales.   

Pending Home Sales Drop to Record Low in the Data, from Already Low Levels, on Big Drops in the South & Midwest | Wolf Street

Position: None

The following is from Peter Boockvar:

Home construction and sales in September

September single family housing starts fell to 859k from 900k and vs 875k in the month before. That’s the least in a year but not surprising considering what we’ve heard from the homebuilders, the affordability challenges the buyer faces and the supply issued builders face.

Multi family starts slowed to 362k from 388k in August and vs 494k in July. This is a very volatile monthly figure but most relevant hearing from the publicly traded multi family REITS, sunbelt construction has slowed dramatically. I do believe though new starts have picked up in the coastal states and apparent in the Tri-State area burbs that I see.

Permits for single family homes fell to 845k and that is the lowest since March 2023. They rose to 555k from 523k for multi family.

With buying a home for a first time interested buyer ever more difficult, I think the excess apartment supply in parts of the country will get further absorbed and in 2027 we’re going to see an inflection up in rents again. Single family starts will remain challenged until income gains catch up to the price increases and/or mortgage rates fall.

And on the supply side, I’ll mention here again what was said in yesterday’s NAHB report: “tight lending conditions and elevated land, labor and construction costs persist” and “Builders also continue to face higher material costs, rising gas and diesel prices and persistent labor shortages. In some markets, builders report that increased immigration enforcement is discouraging legal workers from reporting to job sites.”

Single Family Housing Starts

Multi Family Starts

With regards to pending home sales in September, they plunged by 7.3% m/o/m, well worse than the estimate of down just .5%. It now sits at a fresh low for this data point back about 25 years. The weakness was across all four main regions.

The reason is obvious, “Market conditions weakened in September due to fast-rising mortgage rates” said the NAR. Nothing more to add as we know exactly the challenges being faced in this key part of the US economy.

Pending Home Sales

Positions: None.

Break in!

Equities are taking a leg lower based on reports (from “Trade The News“) that an Iran/U.S. ceasefire deal is “close” is untrue.

Position: None

From Toddo:

Positions: None.