Note to Readers: If you haven’t yet had a chance to read Strategist Larry’s latest weekend email where he discussed the possibility of new bears potentially getting trapped, make sure to read it here.
Did we just form an ultimate bottom in the markets? No, we don’t think so. But that doesn’t mean we can’t have a brief counter-trend rally that we’ve discussed over the past several emails from materializing. We will continue to help our friends inside our Community stay on top of markets from an intermediate-term based investing strategy. As a reminder, we are not experts in Day Trading, Scalping, or short-term strategies. Intermediate/Long-Term Investing is our primary strategy.
The Bank of England became the first bank to capitulate on its plans to proceed with QT on Wednesday when the central bank restarted QE in a bond-buying operation, warning of a "material risk to UK financial stability".
It also raised the prospect of a “tightening of financing conditions and a reduction of the flow of credit to the real economy”.
In the UK, QT is over before it even started and QE is back.
Sales of new single-family homes surged 28.8% in August, surpassing Street expectations. Despite the surge in sales, inventories of new homes for sale ticked higher and stand at their highest level since mid-2006.
This comes at a time when the effective 30Y mortgage rate (which accounts for compounding) is at 6.86% and the cost of borrowing has skyrocketed.
Homebuyers may be taking advantage of stagnated home prices and adjustable-rate mortgages to “buy the dip”. This dangerous strategy could easily backfire as mortgage rates climb higher. Remember, the Fed’s MBS holdings haven’t budged at all yet!
Chart That Caught Our Eye
Analyst Team Note:
“Our flow data suggest evidence of tax loss selling by institutional investors in Oct. (peak outflows) vs by retail investors in Dec. ahead of the 12/31 cutoff for individual investors” - BofA
We want to take a moment to thank Interactive Brokers for being one of our Channel’s trusted Partners and to inform my audience of the special features they have given that our online friends here closely follow Chinese Internet stocks (BABA/Tencent).
Much of Larry’s audience is concerned about the US ADR issue of Chinese Stocks being delisted.
