New home sales fell by 17.30% in October, marking the most significant monthly decline in ten years, as shown in the graph on the left below. Furthermore, the supply of new homes on the market rose from 7.7 to 9.5 months. Not surprisingly, building permits fell by 0.4% following a 3.1% decline last month due to slowing sales. New home sales have been negative in six of the previous eight months.

Furthermore, the Case-Shiller home price index shows weakness in the housing market. The latest report shows that previously owned home prices fell by 0.3%, bringing annual home inflation down from 5.2% to 4.6%. As the graph on the right shows, the index is now back to levels or even below those seen in the five years before the pandemic. Furthermore, it continues to

In a recent Commentary- MicroStrategy Is A Leveraged ETF In Disguise – we discussed the company’s business model, which revolves almost entirely around highly speculative bitcoin and leverage. To wit:

So, what is MicroStrategy? It’s a leveraged Bitcoin fund disguised as a non-profit technology company.

Regarding leverage and speculation, we also recently discussed the surging use of options, particularly those with short time frames. Options employ significant leverage. Thus, record options volume, especially in calls with short periods until expiration, is another sign that speculation is rising.

In addition to the two examples of growing leverage and market speculation, we see surging volume in leveraged single-stock ETFs. An example of such an ETF is

Donald Trump nominated seasoned hedge fund manager Scott Bessent as the next Treasury Secretary. While the Treasury Secretary has many responsibilities, debt management is one of the most important. Therefore, given the recent scrutiny the bond market has been paying to high deficits and associated debt, Scott Bessent appears to be a timely appointment. Bessent appears to appreciate the bond market’s concern, which helps explain why he immediately released his 3-3-3 rule. As the name suggests, the 3-3-3 rule has three components as follows:

Cut the budget deficit to 3% of GDP by 2028

Push GDP growth to 3%

Pump out an extra 3 million barrels of oil per day

The bond market is cheering Bessent’s selection and his 3-3-3 rule. Given the recent spate of

Since the election, Bitcoin has risen nearly 50%. While Bitcoin investors are licking their chops, believing the magnificent rally will continue, they need to realize that Bitcoin is entering a period of pronounced seasonal volatility. The graph below from Sentimentrader shows that the recent performance has tracked the typical performance for the time of year. However, as they highlight with the green line, the recent gains may fade, and volatility in Bitcoin may pick up. The lower graph highlights that Bitcoin’s RSI is very extended. The prior three times it was as overbought resulted in a pause to the sharp rate of assent in Bitcoin. Sentimentrader sums it up nicely in their quote below:

Is it time to lock in some profits on Bitcoin? Who could say for sure?

Walmart’s (WMT) shares opened higher as its earnings report surpassed expectations. EPS and revenues beat expectations. Moreover, the company increased its sales guidance for next year by a full percent.

As its latest earnings report reminded us, Walmart is doing very well financially. Furthermore, its share price has surged, reflecting the company’s health. While the price of Walmart shares should increase with its fundamentals, we must ask if the stock performance is commensurate with earnings. This is where technical analysis can look beyond fundamental analysis and play an important risk management role for shareholders.

Over the last year, Walmart shares have risen by nearly 100%. As the longer-term weekly graph below shows, Walmart’s Williams R% and

Many investors consider a decline of 20% or more to be a bear market. We can debate the merit of the random 20% figure, but according to that definition, gold miners, down 25% from its peak on October 22, are in a bear market. We have noted numerous times in the last month or so that gold and gold miners were getting very overbought based on their technicals. Furthermore, our recent article – Why Is Gold Surging? – highlights how the price of gold is diverging from its fundamentals. As we wrote:

The speculative atmosphere can continue, but beware because gold is getting overbought and deviating from its long-term fundamental drivers. When speculative momentum fails, gold may eventually catch down to its fundamental relationships.

The SimpleVisor graph below

At the last FOMC meeting, Jerome Powell was asked if they were concerned that inflation expectations are “de-anchoring, or put another way, are anchoring at a slightly higher level?” His answer specifically referenced the 5×5 forward inflation expected rate. He could have used many data points to answer the question. However, the fact that he specifically mentioned the 5×5 rate gives us an inflation expectations benchmark to better gauge how the Fed will manage monetary policy.

The 5×5 inflation rate uses five and ten-year inflation expectations, as derived from the difference between nominal and TIPS yields, to calculate what they imply about inflation for the five-year period beginning in five years. For example, if the 5yr expectation was 1% and the 10yr was

While the "Trump rally" appears to have just begun, one of its initial hallmarks is that investors want beta. Beta is a measure of the volatility of a stock versus the broader market, most often the S&P 500. For instance, a stock with a beta of 1.50 implies that based on prior trading, investors should expect the stock to be 1.50% more volatile than the S&P 500. Investors seeking beta must assume the market will be heading higher in the short term; thus, higher beta stocks should outperform the market.

The paragraph below, courtesy of Bloomberg, supports the beta chase into year-end.

In fact, it’s a trend that plays out year in, year out. Bank of America notes that stocks with the highest volatility, known as beta, have tended to beat the market in the final

On the campaign trail, Donald Trump favored the crypto industry, including appointing "crypto-friendly" regulators. Moreover, one of the plans he mentioned several times was the creation of a federal strategic reserve of crypto assets. Trump’s decisive victory, along with the Republican sweep of Congress, makes it even more likely the crypto industry and related cryptocurrencies will benefit from a Trump presidency. Accordingly, in the aftermath of the election, crypto has been soaring. The following quotes are courtesy of a Bloomberg article on the topic:

“We believe a significant portion of the institutional market de-risked in the lead-up to the election and is now re-entering post Trump’s win, creating material buying pressure — this is likely to be

Super Micro Computer Inc. (SMCI) was the market’s darling only six months ago. Amazingly, Its stock, had risen 3x in just the first three months of 2024. Consequently, S&P Global announced its addition to the S&P 500 Index. The announcement is annotated below with a box in early March. Furthermore, the circle, which coincides with the peak in Super Micro shares, was the date it started trading in the index. From the day it joined the index to today, it has been a one-way downhill ride for shareholders.

The bad news continued last Friday, with shares already down about 80% from the March peak. Super Micro’s stockholders learned the company could face a liquidity problem. If the company does get delisted from the Nasdaq stock exchange, it could be forced to make

“Crypto’s Crash,” says some financial news headlines. The reality is Bitcoin, Ethereum and others are down about 10-15% in the last few days. The word “crash” may seem appropriate to describe the sharp decline, except 10%+ moves in a matter of days is the norm, not the exception for crypto.
Ignoring the crypto crash, the S&P 500 went higher. The index is up over 25% this year. Despite such an outsized gain, the table below from LPL Research argues we should be optimistic for 2022. Of course, it’s worth noting some of these outsized returns were coming off of major bear market lows such as 1975, 2003, and 2009.
What To Watch Today
Economy
7:00 a.m. ET: MBA mortgage applications, week ended Nov. 12 (5.5% during prior week)
8:30 a.m. ET: Building

$BITO, the first Bitcoin ETF was issued Tuesday morning. The ETF provides retail investors their first true access to Bitcoin without having to open up a crypto wallet account. BITO tracks bitcoin futures and is expected to track the cryptocurrency much closer than the Grayscale Trust (GBTC).
Stocks rallied alongside BITO and posted a fifth straight green day. The index is now well established above its 50dma and aiming for new record highs. However, not surprisingly, the market surge has quickly taken the index back to overbought conditions short-term. Such suggests we could see some consolidation, or a potential retest of the 50-dma, before attempting all-time highs.

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What To Watch Today
Economy
7:00 a.m. ET: MBA mortgage applications, week ended Oct. 15 (0.2%