20 Apr Locking bias
Not much change has happened in the most recent seven trading days for the bond market. Although the floor of support provided by the Fibonacci level has held, it is concerning that bonds seem to have developed a new ceiling that has proven formidable over this time frame. In each of the last seven trading days, bonds have attempted to break above this level. Like scrambled eggs sitting in a frying pan, over time this ceiling will become more like rubber that will cause bonds to bounce when they hit. If the bounce lower has enough velocity, it could push bonds beneath the floor of support. So, unless bonds are able to make a break higher in the near term, they will become more susceptible to a more dramatic fall.
Oil prices have become such a driving force to both the stock and bond markets that many investors are making trades based on the direction in the oil market. So far this morning, oil prices are near unchanged levels. Since bottoming out in February of this year, prices have made steady climbs higher. This is mirrored in the stock market and has caused mortgage rates to move higher from their lows of February. The unhealthy dependence the stock market has with the oil market could determine whether stocks are able to continue their run higher and set new all-time high levels in 2016. Both stocks and oil are showing signs of weakening. A pull back in oil and stock prices would ultimately help the bond market, helping interest rates to remain at low levels for the home buying season of summer.
Unless bonds are able to break above at least the first ceiling of resistance, there is little benefit to float. For those needing to close soon, the safe play will be to maintain a locking bias.