Mortgage REITs Are Finally Showing Signs of a Trend Change

 

You don’t hear much talk about mortgage REITs these days, and for good reason, they’ve been dead money for a long time. But that’s exactly why I’m starting to pay attention now. When an area of the market has been ignored for years and then begins to show signs of life, I want to know about it. Above is a weekly chart of REM, and in the lower pane is a ratio line of REM versus SPY. That ratio line tells the real story.

For many years, REM has been in a clear downtrend relative to the S&P 500. Owning mortgage REITs simply didn’t make sense when compared to owning the broader market. Capital consistently flowed elsewhere. But look at what’s happening now. For the first time in roughly five years, the REM/SPY ratio is breaking its downtrend line. That’s a big deal. Relative strength trends don’t change often, and when they do, it usually signals an important shift under the surface.

What makes this even more interesting is that price is now confirming what the ratio line has been hinting at. If you look at the price chart of REM, you’ll see it is just now breaking through a key resistance level. I always want to see price confirm relative strength, and that’s exactly what we’re getting here. This combination of relative strength improving and price breaking out is often how new leadership begins.

When I drill down into the individual names, the picture gets even better. Stocks like NLY, TWO, and AGNC have all been acting very well since January 1st. They’ve been making higher lows, holding gains, and responding positively to buying pressure. That tells me money is clearly moving into this space. Institutions don’t tiptoe in quietly by accident.

I’m not chasing these stocks here after the initial move. My plan is simple: I want to be a buyer on a pullback. If this really is a change in trend, there should be opportunities to enter on weakness. Mortgage REITs may not be exciting, but the chart is starting to say something important and I’m listening.

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RDW Bulls in Control as Volume Hits Record Levels

 

Another positive week is in the books for RDW, and once again the bulls remain firmly in control. From both a price and volume perspective, it’s hard not to respect what this market is doing right now. When I look at the weekly chart above, the first thing that jumps out is the record weekly and monthly volume. That kind of participation doesn’t show up by accident. It tells me there is real interest building under the surface, and that often lays the groundwork for further upside down the road.

What makes this setup even more compelling is the steady increase in volume over the past seven weeks. Each push higher has been met with more participation, not less. To me, that’s a sign of accumulation rather than exhaustion.

That said, patience is still my biggest challenge right now. I’ve been waiting for a meaningful pullback to get involved, but my bids were simply too low. That’s frustrating, no doubt, but it’s also part of the process. I refuse to chase price just because I’m afraid of missing out. Chasing might work once or twice, but over time it’s a great way to destroy discipline and risk management.

Ideally, I’d like to see a pullback toward the $9 level, where risk and reward would line up much better for me. Whether we actually get that remains to be seen. Over the past seven weeks, RDW has only given us three pullbacks on the daily chart, and each of them lasted just two or three days before buyers stepped back in. That tells me demand is strong and dip buyers are aggressive.

At the very least, I’m looking for a multi-day pullback to help relieve some of this short-term extension and give me a cleaner entry to work with. Until then, my job is to wait, stay disciplined, and let the market come to me. We’ll see how things unfold next week.

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MSOS Coils as January Catalyst Window Narrows

 Another week is officially in the books, and overall it was a relatively quiet one. Sometimes those are the weeks that test patience the most. When I step back and look at the bigger picture, though, I’m reminded why it’s important to stay focused on structure and context rather than day to day noise.

If you look at the 60-minute chart of MSOS on the left, it’s pretty clear that price has been moving within a defined rising channel for the past three weeks. Right now, we’re sitting near the bottom of that channel. From a technical standpoint, that’s an area where I want to be paying close attention, not because I’m predicting an immediate move, but because risk and reward are starting to line up more favorably if we do see a turn higher.

Overlay that technical setup with the potential fundamental catalyst, and things get interesting. President Trump has publicly stated that he wants Pam Bondi to finalize rescheduling by the end of January. When you actually count it out, that leaves us with just nine more trading days left in the month. That’s not a lot of time. Whether it happens or not, the key takeaway for me is that this catalyst could drop at any point, and the market rarely gives you much warning when that happens.

Looking at the weekly chart on the right, another detail stands out. This was the fifth consecutive weekly close, all within about fifteen cents of each other. That kind of tight clustering usually doesn’t last forever. As I mentioned last week, I’ve been expecting an increase in range expansion. We didn’t get it this past week, which tells me the pressure is still building. The longer price coils, the more important it is to stay prepared rather than complacent.

On a positive note, we did make a higher high and a higher low on the weekly chart. That’s constructive price action, even if it doesn’t feel exciting in real time. For now, my focus is on staying ready. A breakout move could come any day now, and I want to be positioned mentally and strategically when it does.

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Relative Weakness in QQQ Signals Caution, Not Panic

 Above is a daily chart of QQQ with its 50-day exponential moving average, and in the lower pane I’m looking at a ratio line of QQQ versus SPY, also with a 50-day EMA applied to that ratio. This combination gives me a much clearer picture of what’s really going on beneath the surface. On the price chart alone, QQQ looks fine. It’s clearly trading above its 50-day EMA, which by itself would suggest the trend is still intact. However, when I shift my focus to the ratio line, a different story starts to emerge.

The QQQ/SPY ratio is not above its 50-day EMA. That’s a clear sign of relative weakness. In plain terms, even though QQQ is holding up on an absolute basis, it’s underperforming the S&P 500. This tells me that money is rotating elsewhere and that Nasdaq stocks are not leading the market right now. As a relative strength trader, this is information I take very seriously because leadership matters. Markets tend to follow the strongest areas, and right now the Nasdaq is not wearing that crown.

That said, the appearance of relative weakness does not automatically mean I need to short the market. This is an important distinction. Relative weakness is a warning, not a trigger. At this point, I view it as a yellow light. It’s telling me to be cautious, tighten risk, and pay closer attention to key levels. As long as price continues to hold support, buyers are still in control enough to keep things stable.

What would change my stance is a clear break of support. If QQQ breaks below this week’s low of 614.56, that would be a strong signal that sellers are starting to overwhelm buyers. At that point, the combination of relative weakness and a loss of price support would suggest that lower prices are likely in the days ahead.

So for now, I’m not aggressively bearish, but I am on alert. Relative weakness has shown up, and I respect it. If price confirms it by breaking support, I’ll adjust quickly and expect downside follow through.

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Relative Strength Signals a Uranium Rally

 Uranium stocks displayed notable relative strength early in the day, and that immediately caught my attention. Above is a 5-minute chart of URA, with the SPY shown in the lower pane for comparison. Right from the start, the divergence between the two told an important story.

If you focus on points A and B, you can see that the SPY was trading significantly lower at point B than it was at point A, a clear sign of broader market weakness. URA, on the other hand, behaved very differently. Instead of following the market lower, it held firm and actually made a higher low at point B. That’s relative strength in its purest form, and it was an early signal that the uranium group was under accumulation and could be setting up for a rally.

What made this signal even more compelling was the broader context. If you’ve been following my earlier posts from today, you’ll notice that we saw this exact same relative strength pattern show up in the rare earth stocks and even in some of the drone related names. When multiple, unrelated groups of stocks begin to display the same type of behavior at the same time, it adds credibility to the signal. It tells me this isn’t just a one off move in a single ETF, but a broader shift in where buyers are focusing their attention.

Getting back to the uranium stocks, once URA pushed through its intraday highs, the move really started to gain traction. The ETF continued to rally for several hours, confirming the early relative strength we saw during the market’s weaker moments. Individual names within the group followed suit. Stocks like UEC, UUUU, URNM, and NNE all showed similar patterns and went on to post solid intraday gains.

This kind of coordinated strength across an entire group is something I always pay close attention to. It often marks the early stages of a potential trend rather than just a short lived bounce. Now the key question is whether we see follow through. I’ll be watching closely to see if this strength carries into tomorrow’s session.

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