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Food & Shelter

Well folks, despite a slew of business and housing data being released this week, some of which were already out with negative results yesterday, the market has continued its stream of gains and is relatively unchanged in the premarket today. Read on for your daily dose of market inspiration!


“There are three ways to ultimate success: The first way is to be kind. The second way is to be kind. The third way is to be kind.”

—Mister Rogers


Market Talk

The S&P 500 advanced 95 bps throughout the trading day with a steady stream of flows into equities since the open - this prompted the $VIX to stay just below 20 for a majority of the trading day. This price action was quite interesting yesterday given the severe miss of the NY State Empire Manufacturing index, which was reported at -31 when consensus estimates were forecasting 5.5, this represents a steep drop in the level of manufacturing for business’ in the state of NY. Regardless, futures have slipped about 25 bps across most US equity indices on recession fears possibly being confirmed by poor housing data through the rest of this week.


Short: Sea Limited (SE-NYSE) | Timeline: 2 days

Sea Limited (SE-NYSE), a company that engages in the international digital entertainment, e-commerce, and digital financial service industries, has reported a wider than expected loss in its earnings report this morning. The Singapore-based company posted a net loss that has more than doubled to over $931 million due to a sudden ban of its most popular mobile game in India, and as a result, the company has had to reduce their overseas footprint by slashing jobs in peripheral businesses. Taking a look at the technical side, Sea Limited has retraced upwards after the stock plummeted 75% since peaking in October. That being said, the MACD has signalled overbought levels in this bear run and a rising wedge has formed - “a pattern that shows up in charts when the price moves upward with pivot highs and lows converging toward a single point known as the apex. When it is accompanied by declining volume, it can signal a trend reversal and a continuation of the bear market” (Source).


Short: Taylor Morrison Home Corporation (TMHC-NYSE) | Timeline: 3 days

Taylor Morrison Home Corporation is one of the largest homebuilders and home sellers in the United States. Rather than just building the home, TMHC sells and can be the ones to insure the property. They are primarily focused on single-family homes and the master planning of suburban communities. The NAHB sentiment survey was released yesterday and the results were a negative shock relative to analyst expectations. While originally forecasted to come in at 54 the end result was a dismal 49. Anything below 50 is considered to indicate that the US is in a housing recession. Moreover, there has been a recent glut in the supply of new homes as looming economic fears plague the American people.

As the chart above displays, there’s currently an excess supply of new homes on the market not seen since 2007. As these homes make up the bread and butter of TMHC’s business, we can expect diminishing returns going forward. Additionally, this morning the seasonally adjusted building permits and housing starts report was released with mixed results. Building permits came in at 1.67M, above forecasts of 1.63M, while housing starts were only 1.45M compared to a forecast of 1.52M. This signals that developers have plenty of access to land and the go-ahead to start construction, yet many are holding back as they wait to see how the remaining months of the year pan out before the main spring building season. In terms of the technicals, the company is currently trading in a band between its 50-day, and 200-day moving averages after experiencing a death cross in April of this year. TMHC has been rejected from the 200 MA level throughout the trading sessions of the past two weeks, we believe that it will not be able to break through this week especially as mixed economic data continues to trickle in. This thesis is further supported by the recent drop in the company’s momentum which currently rests at -0.24.


Chart of the Day - PBOC to Fed Rate Policy Spread vs. USDCNY (Inverted)

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