In Monday’s Closer, we discussed the details of the monthly Mortgage Monitor for the month of August from Black Knight. The report showed a further decline in the delinquency rate, albeit at a slower pace of improvement. Additionally, while lagged an extra month, the report also showed new mortgage originations for the month of July. Like most housing-related data, the report showed new originations continue to come in at a strong clip with the reading for the month of July rising to a 1.422 million; the highest since at least 2013.

By the same token, the Mortgage Bankers Association’s indices of mortgage purchases and refinance activity (updated this morning) both likewise remain at very healthy levels.  In the case of the Mortgage Purchase index, it has fallen in back to back weeks for the first time since the second half of July. But the1.5% decline this week and 1.9% drop last week have only brought the index as low as it was at the end of August.  Overall, the index has been more or less trending sideways over the past few months, but that sideways move has been at very strong levels.  In fact, outside of the higher readings earlier this year, the purchase index’s current levels are similar to those last seen in the first weeks of 2009. In other words, there has not been any significant increases or decreases in mortgage purchase and refinance activity in recent months, but activity remains very elevated relative to the past decade.

It is a similar story for the refinance index which rose over 8% this week to its highest level since mid-August as mortgage rates have shifted lower; the 30-year fixed rate national average has dropped roughly 5 bps from the late September peak.  Just as with the purchase index, refinancing activity has been off the highs and fairly stable over the past few months, but that is at some of the highest levels of the past several years.

Similar to the indices from the MBA, the homebuilders have also hit a bit of a plateau recently.  In September, the Homebuilder ETF (XHB) had been in consolidation, but over the past few days, the Homebuilder ETF (XHB) has once again broken out and has so far successfully retested the prior September highs as support. Click here to view Bespoke’s premium membership options for our best research available.

The TD Ameritrade Investor Movement Index is a proprietary, behavior-based index created by TD Ameritrade designed to indicate the sentiment of individual investors’ portfolios.  It measures what investors are actually doing with their money as opposed to other sentiment surveys based on what investors say they’re doing with their money.  While a number of sentiment indicators only ask investors how they feel about the market, this index sheds a bit more light on their actual actions.

Based on the latest results of TD Ameritrade’s index, investors remain increasingly optimistic even after September’s pullback in equity markets.  In this month’s update, the index climbed from 4.93 to 5.71.  That’s the highest reading since October 2018 and the first time that the index topped its pre-COVID peak of 5.68 from back in January.  With a long-term average level of 5.7, it’s hard to argue that investor sentiment remains subdued after this month’s update.  That being said, the index has been higher than current levels a number of times over the last ten years.  With equities right near record highs, you would expect sentiment to be optimistic, and now it appears that the wall of worry isn’t as high as it once was.  Click here to view Bespoke’s premium membership options for our best research available.

After surging during the COVID lockdowns and the summer protests and riots around the country, US background checks for firearms have declined for three straight months now.  During the month of September, background checks totaled 2.892 million which was down by more than 200K relative to August and more than a million from the 3.931 million record high in the month of June at the height of the national unrest.  While background checks are down sharply from their recent peak, we would note that prior to 2020, there were only two other months (December 2015 and December 2019) that saw higher readings than this September.

On a y/y basis, background checks have also dropped sharply from their recent peak of 79.2% in July.  That reading was the second-largest y/y increase on record behind only the 81.2% increase in January 2013 at the start of President Obama’s second term.  Here again, though, a y/y increase of over 30% is still large.  Going back to 2000, there were only 11 other months outside of 2020 where the y/y reading was above 30%, while this year there have no been seven in just nine months.

Below we have provided snapshots of the two publicly traded gun manufacturers – Smith and Wesson (SWBI) and Sturm Ruger (RGR).  The charts for both stocks look like spitting images of each other as they both saw big rallies in the Spring that really got going in early June as unrest spread across the country.  The rallies in both stocks actually stalled out about a month after gun sales peaked, bringing both stocks back down near levels they traded at in early June.  In recent days, though, as Biden has widened his lead in the polls, both stocks have started to attract renewed interest. Click here to view Bespoke’s premium membership options for our best research available.

Since the pandemic began, Consumer Discretionary and Technology stocks have consistently outperformed while Energy has lagged.  Evident in the relative strength lines versus the S&P 500, these trends are still very much holding true, but there have been some interesting changes recently.  For starters, Technology’s relative strength line remains in its uptrend—indicating outperformance relative to the S&P 500 over the past year—but at the start of this month the line put in a lower higher.  Meanwhile, the relative strength line of Communication Services has been generally trending lower for some time now, but has more recently collapsed to some of its lowest levels since the spring.

Conversely, some other sectors have seen their trends turning around.  Utilities and Real Estate are some of the most obvious examples of this with clear breakouts of their downtrends that have been in place for much of the past year.  Health Care and Financials are now looking to join those two defensive sectors as they are right near their downtrend lines.  Consumer Staples has also begun to trend slightly higher.  Of the other sectors, the relative strength lines of Consumer Discretionary, Industrials, and Materials all continue to trend higher with some bounces in the past few days.  Click here to view Bespoke’s premium membership options for our best research available.