Notably, the S&P Short Range Oscillator moved further into overbought territory — at 2.98% vs. 1.5%.

Nasdaq Advance Decline Intraday x 3 Days

 S&P 500 Sectors at Closing

Closing Volume

- NYSE volume 13% below its one-month average.

- NASDAQ volume 5% below its one-month average.

Breadth

S&P 500 Sector ETFs

Nasdaq 100 Heat Map

From The Master:

Masterhedge

A word on Polymarket from one of my primes.

Polymarket and election baskets -à regardless of who wins this feels like a big fade and correction is coming to recent divergence …

But I don’t even know what to make of the so called Trump and Harris baskets to begin with (they seem absurd in their construct) .

1. I am absolutely gob smacked that large reputable banks are citing these and apparently macro funds trading off of it-- heavily manipulated / bias betting markets. Maybe its just a game and trading in to the positive feedback loop vs actually taking them seriously (at least for the buy side funds and that works for me).

2. At best this is a toss up (vs current 60 – 40 spread on Poly).. reminder—Polymarket is all crypto, all off shore, mostly men -- no limit bets and obviously influenced and self dealing (think any scammy crypto project that gets pumped on social media). I could provide plenty of evidence that point to this but anyone can do their own research on it—prefer not to go down rabbit holes and conjecture.

3. Im old enough to remember when polymarket had Shapiro at ~90% as VP the night before Walz was taken.. and that a red sweep was at ~70% night before midterms. They have been horrid predictors.

4. The other betting markets moved well after Polymarket… citing their moves doesn’t make a point. Correlation v Causation.

5. Further-- The “Trump” election baskets consists heavily of infrastructure and oil and gas (how does this make any sense vs reality / last 4 years? I understand from a historical context but doesn’t seem relevant to recent past). Prisons and crypto in these baskets does make sense. I think both admins are going to be very similar on economy, run huge deficits and be populist. Govt is going to be divided and there will be gridlock.

6. This is NOT an election take. This is trying to make sense of a nonsensical betting market that apparently many people are taking seriously and trading off of. Whatever so called trump baskets vs Harris baskets start working back towards each other vs the recent divergence

7. Disagree?? Great—send me some feedback and best ways to play this. Truth of the matter is I don’t think these trades/phenomenon’s last for more than the next few weeks anyway. Something to talk about while everyone is waiting for Godot (and banks trying to create trading activity narratives)

With S&P cash +30 handles I am adding to my small Index calls short.

The shares of Trump Media  (DJT)  have risen from about $13 to $31 (+$4 today) over the last 3 1/2 weeks.

I have shorted a small amount of DJT in the money calls out to November and December.

My estimate of DJT's intrinsic value is between $5-$10/share.

I just covered my PepsiCo  (PEP)  short (at $174, -$1.90 on the day) from early October for a small loss.

The Buffett Indicator:

I am going to leave early today for a trip — returning back to my perch on Friday morning.

Today's market (at 2:10 pm.m) is quite bifurcated, led by the average cap weighted S&P +0.60% and the Russell Index +1.75%, while the Nasdaq is slightly lower.

I did little trading; it was another day filled with research calls/meetings.

Today's "things":

* I shorted  (MS)  between $115.35-$121 and at an average price of $117.24.

* With S&P cash +13 handles I shorted a very small position in Index calls.

Stan on Bloomberg:

Bloomberg Talks: Duquesne Family Office Chairman and Chief Executive Officer Stanley Druckenmiller - Bloomberg

Bidding for cannabis, across the board .... otherwise quiet on the trading front.

But busy on the research front.

Bright Minds Biosciences (with the appropriate symbol of  (DRUG) ) develops innovative treatments for complex developing psychiatric disorders by focusing on creating safer and more effective drugs by enhancing the properties of serotonergic compounds.

Some of the smaller cannabis and psychedlic ETFs hold positions in DRUG.

Over the last two days Bright Minds made another meme stock, Gamestop  (GME) , look like chopped liver — rising by +3,200% (though it is -30% today!):

In my case for cannabis several weeks ago I suggested that some might view it as far fetched.

Specifically, if Amendment 3 in Florida (for adult use in the state) passes in early November coupled with a rescheduling of cannabis from I to III (which would alleviate the disproportionate tax burdens by removing cannabis businesses from the jurisdiction of Section 280E of the Internal Revenue Code),  it is not too far fetched for me to see cannabis stocks igniting like some of the meme stocks of the past.

Importantly, these two factors could hasten a third catalyst — resolution of capital markets issues facing the sector (uplisting and custody), which could provide the basis for said "memecity" (my word!).

From Peter Boockvar: 

Oh behave/The Jane Fraser lay of the land/And other noteworthy stuff

We know for many years that the Bank of Japan has been wanting higher inflation, something sustainable around 2%. They've actually now gotten it in every month since March 2022 with inflation above 2% but they still only have their overnight rate at just .25%. What they and other central bankers still don't realize, even after the last few years, is that while the average person of course does not like high inflation, they don't even want a 2% rise in their cost of living. 

If you didn't see in the Financial Times this week, there is an article titled "Tokyo Bans Harassment of Staff by Customers." It says, "Tokyo will become the first part of Japan to ban customer harassment of service workers amid a perceived worsening of consumer behavior that some analysts say is linked to the return of inflation."

This is meant to "tackle customer nastiness known by the abbreviation 'kasu-hara'...Now that sustained inflation has returned, senior executives in the restaurant, hospitality and retail sectors say customers are unhappy."

This was a quote in the article from Jesper Koll who is a Japanese based economist, "During the decades of deflation, customer satisfaction and happiness was built in. Now that prices are going up - and going up not just once but more or less consistently - Japanese feel cheated. Under deflation, the customer was always king. Under inflation, they are taken for a fool." https://www.ft.com/content/f48b9af5-d48c-45c3-a9cd-6d34b3759202

My point here is too many think about inflation simplistically. High inflation bad, 2% good. All deflation bad. It's not that simple. Lower prices are why the technology in your hand is so cheap. Lower prices are why Walmart and Amazon are the two biggest employers in the country. Deflation is really only bad for those that have too much debt to service and for those companies that don't have productivity and volume levers to pull. The consumer loves deflation. 

Speaking of inflation and how the US consumer feels about, in the NY Fed's Consumer Expectations survey out yesterday, the one year expectation for it remained at 3%. It rose to 2.7% from 2.5% for the 3 yr view and up by one tenth to 2.9% for the 5 yr guess. The 2 tenths rise for the 3 yr view was "most pronounced for respondents with at most a high school degree" and likely a cohort that is feeling the inflation pain the most.

The answers to the labor market questions rose a touch but were little changed for income. Most noteworthy within in the data was on the credit quality side. "The average perceived probability of missing a minimum debt payment over the next three months increased for the 4th consecutive month to 14.2% from 13.6% in August. This is the highest reading of the series since April 2020. The increase was most pronounced for respondents between ages 40 and 60 and those with annual household incomes above $100k." Interesting and that percentage is the highest since 2017 not including Covid. 

Debt Delinquency Expectations Over Next 3 Months

To the earnings calls and comments.

From Bank America:

"Bank of America continued to demonstrate strength this quarter in an economy that continued to be stable, albeit with slower growth and falling inflation. So many have asked me from time to time, what do we see in our own customer base? As we talked about many times, our consumer payments is an indicator of activity. Those payments were up 4% to 5% y/o/y for the quarter...The pace of y/o/y money movement has been steady since late summer this year, after having fallen in the spring and early summer. This growth in consumer payments continues into October. This activity is consistent with how customers were spending money in the 2016 to 2019 timeframe when the economy was growing and inflation was under control." Keep in mind that the 4-5% is in nominal terms.

On the commercial banking side, "it is consistent with the lower growth economy. Line of credit usage rates remain lower than pre-pandemic levels. This does not surprise us with the dramatic increase in the cost of borrowing for small and medium sized businesses. They aren't being indolent. They want to grow. They are simply being more careful and worry if final demand will hold. Therefore, they are being cost conscious across the board."

Commercial loan growth was 1% in the quarter y/o/y with a drop in CRE loans tempering the growth. "Consumer banking loan growth was driven by credit card, small business and vehicle borrowing and the overall consumer growth was muted by a decline in mortgage balances as paydowns exceeded originations in a higher rate environment."

Net charge-offs were flat q/o/q and "We've seen consumer losses in a pretty tight range for a few quarters now. Outside of that, we saw lower losses from office exposure." Also of note, "we remain reserved for an unemployment rate of 5% by the end of 2025 compared to the most recent 4.1% rate reported."

From Citigroup where Jane Fraser always gives a good macro point of view:

"Now while growth is a lot slower than last year, global economic performance continues to be surprisingly resilient. Whatever you want to call the US landing, the sentiment around it is more optimistic, supported by the recent positive payrolls report. And we see a healthy yet more discerning US consumer and a US corporate sector on its front foot. Manufacturing weakness is restraining a modest rebound in Europe, which continues to struggle with more structural challenges around its competitiveness. And in China, consumer sentiment and the property market remain a concern as markets await details on the expected fiscal stimulus. India, ASEAN, Japan, the Middle East, Mexico, and Brazil are all notable bright spots." A nice plug for emerging markets I say.

Speaking of the consumer globally, this is what LVMH said in their quarterly sales call:

"Overall, demand has been characterized by two opposing trends. On the one hand, demand from China clientele remained fairly dynamic in the first half of the year. However, Chinese consumers are facing growing macroeconomic headwinds, which obviously impacts their confidence and weighs on their discretionary spend. And on the other hand, demand from Western clienteles shows a sequential improvement, this being very gradual, given that inflation and interest rates remained high. So in a nutshell, the net effect of these two trends was slightly positive in the first half of the year and became slightly negative in the third quarter."

On the US consumer Walgreens said this about their retail business:

"the consumer backdrop remains a challenge. We see this with our customer, as sales pressure in the quarter was almost entirely driven by non-essential categories."

Travel remains strong though as seen with United and pricing should also firm up:

"revenue trends improved as the industry reached an inflection point in the quarter with unprofitable capacity exiting the market. Domestic unit revenue was positive y/o/y in August and September. Demand continues to be strong for the United product: Corporate revenues were up 13% y/o/y in September and in the quarter premium revenues continued to remain resilient and were up 5% y/o/y and revenue from Basic Economy was up 20% y/o/y."

From JB Hunt that continues to have to manage thru a manufacturing recession, the recent port strikes and now the aftermath of the two major hurricanes.

"We continue to navigate a challenging freight environment while remaining focused on what we can control."

"we have seen a return to more normal seasonal demand patterns as evidenced across our businesses in the third quarter."

"while we have seen some slight moderation in inflationary cost pressures, the deflationary rate environment continues to pressure our overall margin performance across the segments." They are referring to spot and contracting rates.

"Within our diverse portfolio, our customers are somewhat mixed on the outlooks for demand for their products and what their transportation needs will look like in the near to medium term."

And how did their customers handle the East and Gulf Coast port strikes? "our customers really deployed a handful of different strategies. Some of that was a little bit of a shift to the West. Some of it maybe pulled some inventory in ahead of that strike, and others had a wait and see approach."

This is what ASML said that resulted in the sharp selloff across the chip space:

"While there continues to be strong developments and upside potential in AI, other market segments are taking longer to recover. It now appears the recovery is more gradual than previously expected. This is expected to continue in 2025, which is leading to customer cautiousness."

Shifting to some economic data, weekly mortgage applications fell sharply with the rise in the average 30 yr mortgage rate to 6.52% from 6.36% last week and 6.14% in the week before. Purchases fell 7.2% w/o/w and refi's were down by 26% y/o/y and lower for a 3rd week.

Average 30 yr mortgage rate

We got two Asian central bank rate cuts today. The Bank of Thailand and the Philippines central bank each cut rates by 25 bps to 2.25% and 5.5% respectively. The Thailand move was not anticipated and their Governor said this was a tweak and not the beginning of a rate cutting cycle. Indonesia left its rate unchanged at 6% as expected.

UK gilt yields are falling notably after UK CPI came in lighter than expected. The headline September print was up 1.7% vs the estimate of 1.9% and down from 2.2% in August. The core rate slowed to 3.2% from 3.6% and also two tenths below expectations but remaining above 3% because of 4.9% services inflation growth. Wholesale prices, both output and input costs, fell m/o/m as expected.

The 10 yr UK inflation breakeven is lower by 4 bps to 3.45% in response and for perspective, it has averaged 3.58% over the past year. The pound is down too while the FTSE 100, one of the cheapest markets still around, is up about .7%. Andrew Bailey now has another reason to tweak rates again after the ECB will do so again tomorrow.

UK core CPI y/o/y

With S&P cash +12 handles I have taken a small Index call short (for November and in the money)

* Homebuilder stocks are now vulnerable to a decline...

* But for now I treat these stocks as "trading sardines and not eating sardines" — actively trading around a small core short position.

The housing recovery (in price and activity) has slowed down for all of the reasons I have recently discussed in my Diary.

As expected, the abnormally low inventory of existing homes for sale is now rising and affordability (consider the quantum price increases in home prices between 2017-2022) is dulling demand despite some pressure off of mortgage rates (which have now stabilized). Moreover, the cumulative or stacked inflation in the cost of living since 2000 has pressured consumers' general ability to afford near record home prices. 

Here Wolf Street howls about the weakness and current state of the residential real estate markets.

With the average merchant builder trading at a record multiple to book value (above 2.2x), the cost of new land acquisition expected to cut into future profitability and an emerging and growing imbalance between existing home demand and supply (serving as a competitive challenge to builders of new homes), I expect (in the fullness of time) for homebuilder stocks to retreat meaningfully from current levels.

But for now it appears that investors are considering a new paradigm of non-cyclicality and uninterrupted growth for the sector. This optimism is likely misplaced. (See Bob Farrell's Rule #3 on Investing below):

Farrell Rule #3. There are no new eras—excesses are never permanent.

Translation: There will be a hot group of stocks every few years, but speculation fads do not last forever. In fact, over the last 100 years, we have seen speculative bubbles involving various stock groups. Autos, radio, and electricity powered the roaring 20s. The nifty-fifty powered the bull market in the early 70s. Biotechs bubble up every 10 years or so and there was the dot-com bubble in the late 90s. “This time it is different” is perhaps the most dangerous phrase in investing.

As Jesse Livermore puts it:

A lesson I learned early is that there is nothing new in Wall Street. There can't be because speculation is as old as the hills. Whatever happens in the stock market today has happened before and will happen again.

Until there is a break in share-price momentum I intend to treat the volatile and high beta homebuilder stocks as trading vehicles (and weigh them appropriately in size). Specifically, my strategy continues to be concentrated on trading around a very small core short position.

Yesterday I continued to do so — profitably.

(Also the numbers released so far)

robbo

1 hour ago

ty, Dougie...is there any possibility Uncle Warren has been selling here, taking tax loss to partially offset his huge gain in BAC?

DK

Dougie Kass

STAFF

Just Now

Some possible explanations why he is not buying the weakness:

He is bearish on equities

He is considering buying the entire company

He is bearish near term on oil prices, so he is being patient

He is working on a very large acquisition

He has handed over the decision to Todd, Tedd or Greg

His health

DK

Dougie Kass

STAFF

3 minutes ago

zero chance as he has to file an amended 13G (holdings) within two days of his trades.

Upside:

-VS +311% (enters into two significant agreements with Aspis Cyber Technologies, Inc.)

-TCS +40% (The Container Store Group, Inc. and Beyond, Inc. announce strategic partnership)

-NVCR +25% (US FDA approves Optune Lua for concurrent use with PD-1/PD-L1 inhibitors or docetaxel, for the treatment of adult patients with metastatic non-small cell lung cancer (mNSCLC) who have progressed on or after a platinum-based regimen)

-ASPN +20% (reportedly US offers Aspen Aerogels $671M loan for Georgia plant to produce fire-suppressing materials for EV batteries)

-LAC +19% (GM confirms contribution to JV with Lithium Americas with combined $625M in cash and letters of credit)

-AMPS +17% (reportedly being taken private deal being contemplated)

-UCAR +10% (Fortune Light Assets reports 14% stake)

-JBHT +7.2% (earnings, guidance)

-SYF +5.1% (earnings, guidance)

-USB +2.1% (earnings, guidance)

-AWH +2.0% (receives approval from New York State Department of Health for OvaWatch)

-UAL +1.7% (earnings, guidance)

Downside:

-NVAX -22% (US FDA placed a clinical hold on IND application for COVID-19-Influenza Combination (CIC) and stand-alone influenza vaccine candidates due to serious adverse event (SAE) reported in September 2024)

-EPAC -6.9% (earnings, guidance)

-LOOP -6.4% (earnings)

-SVCO -3.7% (earnings, cuts guidance)

-OMC -3.1% (earnings, guidance)

-IBKR -2.6% (earnings)

-ULTA -2.4% (guidance, buyback announcement ahead of Investor Day)

-CFG -2.3% (earnings, guidance)

-INTC -1.7% (reportedly QCOM to wait until after the US election to decide on any move regarding Intel)

Chart from 8:37 a.m. ET:

Charts from 8:19 a.m.

Apropos to my post on homebuilders coming up:

Added to my very small Morgan Stanley  (MS)  short at $115.35.

Kamala Harris Blames Marijuana Rescheduling Delay On DEA 'Bureaucracy,' While Defending Her Own Prosecutorial Record - Marijuana Moment

* The key Florida Amendment 3 vote is less than three weeks away.

* Preliminary polling indications are positive.

This table is a valuable resource for momentum-based short-term traders:

From JPMorgan:

US: Futures are mixed with small gains in tech. In MegaCap Tech, NVDA (+0.8%) and TSLA (+0.4%) are leading. Bond yields are lower and USD is higher; 2-, 5-, 10-year yields are 2bp, 5bp, 10bp lower. Commodities are mixed: precious metals are higher, while base metals are lower; oil is unchanged this morning. Focus today in US will be earnings (ABT, MS, PLD); ASML earnings call will be at 9am ET.

and...

EQUITY AND MACRO NARRATIVE: Yesterday, the pre-announcement from ASML led to a sharp risk-off move across tech and AI names: SOXX -5.2%, Mag 7 -1.3%, NDX -1.4%. The kneejerk reaction was also amplified by the relatively high positioning: last Friday, our Positioning Intelligence team told us that their Tactical Positioning Monitor (TPM) for US Equities “remains elevated at around the 92nd %-tile”, which indicates high overall US positioning. On Semis, the team pointed out that “Semis have been bought in recent months, whereas they were sold in the months heading into late June / early July.” Is yesterday’s selloff an over-reaction? One thing to point is that the CFO commentary mentioned “the strong performance of AI clearly continues” and from the release, the weaker 2025 guidance was mostly driven by lower EUV shipments and China weakness. On the other hand, despite this strength, in AI, our TMT specialist Joshua Meyers points out that “cyclical sectors are not seeing the same strength, and capex is on hold”.

"You don't want to be the smartest person in the room; you want to be the dumbest in the room."

- Madonna

Bonus — Here are some great links:

The Consolidation Phase Is Almost Over for Interest Rates 

CHART This

A Strong Time of Year

Trading the VWAP

Bitcoin Is About to Break Out 

* Surpassing the overvaluation of the dot-com bubble and pre Financial Crisis (2007).

* I added to the sector, again, yesterday...