Added to (short) indices:

*  (SPY)  $663.18

* QQQ $598.53

Closing Breadth

Sectors

% Movers

Nasdaq 100 Heat Map

I spent most of the day shorting the market's strength.

For the life of me I have no clue why S&P futures were +40 handles throughout most of the morning — in what can only be described as the Bull Market in Complacency.

Wolf Street howls about near record low pending home sales.

DOJ Requests Extension on Marijuana Rescheduling Case, But Decision Could Still Come Anytime

Costco  (COST)  is down by another -$12 and looks like it will breach $900 to the downside.

Whither the consumer?

Here are today's things:

* Index shorts —  (SPY)  at $664.99 and  (QQQ)  at $600.73.

* Shorted more  (GRNY)  at $24.91 (diversified short of leading growth momentum names) and  (JOET)  (I am negative short term on financials, JOET has large exposure) at $42.96.

* Sold out of  (MSOS)  at $5.14 and all my individual cannabis equities (rumor of imminent rescheduling but is it "waiting for godot?").

* Added to  (PEP)  under $140 (I expect consumer staples to take a leadership position during a correction).

* Initiated short in  (NFLX)  at $1,211 (catalyst President Trump restricting non U.S. movie making).

With my faves Carter, Guy and Dan.

Honest, analytical, transparent and creative trading and investing ideas/observations from three who take ownership.

Let's go to the tape! Nvidia Rebound Takes Stocks Higher

From Peter Boockvar:

Pending home sales in August

On the heels of the August upside surprise in new home sales seen last week (measuring contract signings), the August pending home sales figure (measuring contract signings of existing homes) also beat expectations with a 4% m/o/m gain after a drop of .3% in July. The y/o/y change is flattish, up .5%.

Sales fell in the Northeast but offset by gains in the Midwest, South and West m/o/m.

Keep in mind here that most of the recent drop in mortgage rates took place in September as the August average 30 yr rate was 6.70% vs 6.77% in July and vs the month to date average of 6.5% according to Bankrate and as of 6.36% today. So, it will be really interesting to see how interested buyers respond to this leg down and whether there is follow through and while there should be, much will depend too on home prices. Early signs are good as the purchase application figure for September thru 9/19 is up 10% vs August.

The NAR said “Lower mortgage rates are enabling more home buyers to go under contract. In the Midwest, low mortgage rates combined with high levels of affordability are attracting more buyers compared to other regions.”

Bottom line, we’re getting a nice lift in activity and should also when the September data comes out. How sustainable and the degree of course is what matters next as rates are still elevated and we know home prices are up 50% over the past 5 years. This frozen market will take any thawing it can get and hopefully first time buyers feel some relief.

Pending Home Sales

Besides the complete sale of  (MSOS) , I am out of all individual cannabis equities now.

From Peter Boockvar:

Oil/Trade/Yen, a possible BoJ rate hike in October/Growing China competition

I’ve never once made an investment decision around the implications of a government shutdown because if there is another guarantee in life outside of death and taxes it is that if the Federal Government closes, it will soon reopen and thus the consequences are inconsequential. I’ll leave it at that.

While crude oil is trading down about $1 in response to talk that OPEC+ will again increase its oil production quota this Sunday, it’s becoming clear that the quota increases are more moving in line with current production rather than being an impetus to fully increase production in lock step with the quota change. In a Reuters story last week, “OPEC+ has delivered about three quarters of the extra oil output it targeted since the group started production hikes in April, and the level may fall closer to half later in the year as producers hit capacity limits, sources and analysts said and data showed.”

“OPEC+, which produces 50% of global oil...has been pumping almost 500,000 barrels per day below its targets. The shortfall, equal to .5% of global demand, has defied market expectations of a supply glut and supported oil prices.”

OPEC+ has already unwound its 2.2 million barrel per day cut and another 137,000 addition Sunday would be the second tranche of the 1.65 million barrel per day cut they now are in the process of reversing.

And why isn’t oil production keeping up with the quota increases? In the same Reuters piece, “Firstly, OPEC+ told members including Kazakhstan and Iraq to make extra cuts, called compensation cuts, for previously exceeding agreed levels. Secondly, the group faces dwindling spare production capacity - idle output that could quickly come online - after years of low investment, said OPEC+ sources, industry executives and analysts”

Of note, “One OPEC+ delegate, who declined to be named because of the sensitivity of the matter, said most member countries cannot produce more.”

While I’m talking my book as we’re long oil and gas stocks, I bring this up today because in light of what OPEC is doing with raising quotas and production, WTI continues to hold around $65 and brent around $70. If something doesn’t go down in the face of perceived bad news, it’s typically a bottom. And vice versa. And the futures curve is in backwardation too, highlighting that the market is tight.

While the US crude oil rig count has ticked up in the last few weeks, at 424 rigs it still is hovering around 3 yr lows and I believe US oil production will possibly fall next year after flat lining this year. Over the last 25 years, about 85% of non-OPEC+ oil supply came from US shale.

Bottom line, I think oil at current levels is cheap and the stocks in the group are thus attractive.

US Daily Oil Production per day

US Crude Oil Rig Count

I dug a bit deeper into last week’s August trade deficit in goods data in light of the current tariff regime and how they could be now impacting trade after the rush to procure goods in Q2. So, in August the imports of goods totaled $261.6b seasonally adjusted and for context, that is the least since January 2024. As for US shipments of goods to the rest of the world, in August they fell to the lowest since January and no higher than they stood in May 2022. I’ll argue again, tariffs are mud in the global gears of business and the muted global trade is also a byproduct of a global manufacturing sector that has been in a recession for more than two years now.

Understand here too that the sharp drop in goods imports is actually a GDP booster based on the math in how it is calculated.

US imports of goods by month

US exports of goods by month

The yen is rallying after a BoJ member who has previously leaned dovish is all of a sudden sounding more hawkish. Asahi Noguchi said today that “Various economic indicators for Japan show steady progress in achieving the 2% price stability target. This suggests that the need to adjust the policy interest rate is increasing more than ever.”

They meet again at the end of October and I have to believe they are now lining us up for another hike then based on what I just heard. JGB yields closed down on the day notwithstanding the comments but did lift off their lows in response. Again, something to watch for rates globally.

I will continue to highlight the growing commercial competition between the US and China and that US technology companies have a rival the likes they are not used to seeing. Today from a Bloomberg News article, “Huawei to double output of top AI chip as Nvidia wavers in China.” It says “The Chinese company plans to make about 600,000 of its marquee 910C Ascend chips next year, roughly double this year’s level, people familiar with the matter said, asking for anonymity to discuss private information…Overall, the Shenzhen-based company will raise output for its Ascend product line in 2026 to as many as 1.6 million dies, the people said.”

So, Nvidia not only has more competition within China and is losing market share, China wants to compete on the global stage.

Out of  (MSOS)  completely.

Decided to just sell the common and covered a small calls short position.

Fed Speakers:

7:30 a.m.: Fed Board Governor Waller (Voter) speaks on "Payments" before the Sibos 2025 Conference, Frankfurt, Germany (Text available. No Q&A. Livestream here and here;

8 a.m.: Fed Bank of Cleveland President Hammack (Non-Voter) participates in policy panel on Inflation before hybrid "Inflation: Drivers and Dynamics Conference 2025" hosted by the European Central Bank (ECB) and the Center for Inflation Research and the Federal Reserve Bank of Cleveland, Frankfurt, Germany (No text. European Central Bank. Livestream here);

1:30 p.m.: Fed Bank of New York President Williams (Voter) participates in moderated conversation organized by the Rochester Institute of Technology, Rochester, NY (No text. Moderated Q&A expected. In-person event with virtual option);

1:30 p.m.: Fed Bank of St. Louis President Musalem (Voter) speaks before event, "The Past, Present and Future of the Federal Reserve," St. Louis, MO (In person with virtual option. Panel conversation and audience Q&A follow. No text anticipated. No media availability);

6 p.m.: Fed Bank of Atlanta President Bostic (Non-Voter) moderates a conversation on Atlanta's economy, air travel and leadership as part of the Atlanta Fed Leading Voices Series, Atlanta, GA (Livestream. Audience Q&A expected. No media Q&A. No embargoed text)

Economic Calendar

Away from the never-ending rally in large cap technology - I am watching financials.

(GS)  was +$6 and is now down - the money center banks have mostly also reversed their early session gains.

With S&P cash +26 handles, I am adding to short exposure - in the indexes

I am selling calls against my long  (MSOS)  common.

I will shortly be delta equivalent neutral.

I am short  (NFLX) at a$2,004 on the Trump threatening of tariffs on non U.S. movie production.

I am out of  (GTBIF)  long for a profit.

Game over for pure LLMs. Even Turing Award Winner Rich Sutton has gotten off the bus.

Upside:

-MRUS +37% (confirms to be acquired by Genmab at $97.00/shr in ~$8.0B deal, anticipated to be accretive to EBITDA by end of 2029)

-TLRY +20% (recent notable strength in cannabis stocks being attributed Trump posted a video promoting the health benefits of cannabis, suggesting that covering CBD under Medicare would be “the most important senior health initiative of the century”)

-BCAX +16% (higher off MRUS deal)

-ORKA +12% (higher off MLTX drug data)

-DGNX +6.9% (Diginex and Allocations sign strategic relationship to integrate Diginex’s advanced ESG data collection, framework creation, and verification services into the Allocations platform)

-CISO +6.5% (entered into Preferred Equity Purchase Agreement with B Riley for up to $15M of convertible preferred stock)

-OKLO +6.4% (Oklo and Blykalla form strategic partnership focused on technology collaboration, supply-chain coordination, and regulatory knowledge-sharing)

-USAR +6.2% (to acquire LCM, the world’s most established ex-China rare earth metal and alloy producer for $100M cash and 6.74M USAR shares; entered securities purchase agreement for private placement for gross proceeds of $125M)

-SNDK +6.0% (strength in memory/HDD/flash)

-EA +5.6% (confirms to be acquired by PIF, Silver Lake, and Affinity Partners at $210/shr in cash in $55B deal)

-DDD +4.8% (intends to divest software platforms designed for broad industry adoption across all OEM printer manufacturers, which includes its Oqton Manufacturing Operating System (MOS) and 3DXpert metal printing platforms)

-K +4.6% (Ferrero Group closes $3.1B deal to acquire WK Kellogg)

-WDC +4.5% (strength in memory/HDD/flash)

-LRCX +3.4% (Deutsche Bank Raised LRCX to Buy from Hold, price target: $150 from $100)

-PTON +2.9% (momentum)

-CSX +2.6% (appoints Stephen Angel as new President and CEO and a member of the Board, effective immediately)

-CCL +2.5% (strength ahead of earnings)

-CRMD +2.5% (Rezafungin (REZZAYO) topline results from ReSPECT study expected in 2Q26)

-APP +2.3% (Phillip Capital Initiates APP with Accumulate, price target: $725)

Downside:

-MLTX -88% (reports Phase 3 HS data for VELA trials)

-BYND -52% (launches Exchange Offer and Consent Solicitation)

-LRMR -31% (discloses long-term, late-stage data for genetic disorder drug)

-ENTA -9.9% (Phase 2b study of Zelicapavir for treatment of Respiratory Syncytial Virus (RSV) in High-Risk Adults results)

-MDWD -7.8% (announces $30M Registered Direct Offering of 1.7M Ordinary Shares at $17.30/shr)

-GMAB -4.1% (acquiring MRUS at $97.00/shr in ~$8.0B deal, anticipated to be accretive to EBITDA by end of 2029)

-NVO -3.2% (hearing Morgan Stanley Cuts NVO to Underweight from Equal Weight, price target: $47)

-ZOOZ -3.2% (files $1.0B mixed shelf)

Writeup on Telsa and xAI below.

As I am not particularly close to Tesla  (TSLA)  at all, I cannot speak to the particulars of the article.

However, my view is I would have a better chance at understanding how a bunch of meth addicts would behave at the craps table than I ever would trying to understand that stock. It does seem pretty clear that xAI needs money, and a lot of it at that. Just like everyone else in the industry. One more black hole, just like all the other black holes this industry has spawned.

Nvidia  (NVDA)  has opened a giant can of worms for itself with its investments in OpenAI and CoreWeave  (CRWV) , amongst others. As I have stated, they are seemingly doing this because natural market forces will not do it.

Therefore, it appears they are buying their own revenue.

If you are Elon Musk, why wouldn’t you go to Nvidia and say “you are funding my competitor, you need to fund me too, to the exact same degree.” Seems like that solves the problem, assuming the article is correct. Why wouldn’t everyone else in the industry do that as well?

If you are a cash-rich company, like Google  (GOOGL) , that doesn’t need Nvidia’s cash, but has a big depreciation hit on the come (depreciation is badly lagging CAPEX by about 4x but ultimately has to catch up), why wouldn’t you say to Nvidia “You are funding someone else to directly compete with me, which screws us. Your incremental margins on chips you sell to us are probably 80%-90%, either sell to me at half off or I am going to start investing more heavily in developing my own chips and looking at other alternatives as well because I am not going to keep burning all this cash on a money-losing endeavor.”

Whatever money Nvidia is making, the entire rest of the industry seems to be losing more. In theory, every dollar Nvidia has made and put on its balance sheet could be re-deployed into keeping the industry flywheel spinning by putting it into minority investments (by virtue of absurd paper valuations) into its own customers. This I think is theoretically possible. Wouldn’t that be interesting — the most valuable company in the world would actually be making no money!

Why Tesla is Being Pumped: xAI Needs a Bailout

* Which typically presages an economic slowdown...

*  (SPY)  $664.83

*  (QQQ)  $599.61

From a friend:

"I’ve never once made an investment decision around the implications of a government shutdown because if there is another guarantee in life outside of death and taxes it is that if the Federal Government closes, it will soon reopen and thus the consequences are inconsequential. I’ll leave it at that."

pp09492

Doug what do u see happening with this budget this week. Does something get done. If not does market have a temp decline.

Dougie Kass

1. it doesnt matter if not agreed to this week
2. it will eventually be agreed to
3. not relevant to market which is influenced by flows and not events

* One month ago technicians were confidentally bullish of crypto, now not so much...

Bonus — Here are some great links:

My Cheat Code Chart

Retail Bears Back Down 

Stock Market & Crypto Analysis

Hanging Out

New Sheriff Is in Town

Trump Posts Video On Medical Benefits Of Cannabis For Seniors As White House Weighs Rescheduling - Marijuana Moment

Sold more  (MSOS)  at $5.29

This twitter post has caused a stir in the cannabis markets.

I sold much of my  (MSOS)  at above $5 in the premarket ($4.12 close).

*  (SPY)  $665.24

*  (QQQ)  $600.07

The S&P Short Range Oscillator is -0.32% vs. -1.97% — that's a neutral reading.