Locking Bias

Locking Bias

Kim Jong-Un is at it once again.  This time, the Pyongyang regime launched a second ballistic missile in less than a month over Japan.  The missile they tested flew far enough to put the U.S. territory of Guam within range.  This came shortly after Kim Jong-Um threatened to take out Guam.  It seems this missile test was a show of proof that they had the capability to make this happen.  Stock investors seemed to shrug off the latest move by North Korea, which is a sign they are becoming used to such actions.  Personally, it feels as if the provocations will eventually need to be dealt with in one way or another.  This could very easily become a larger issue, at which time the stock market will not likely be prepared. 

 

Mortgage bonds continue to fall, as stocks remain near record-high levels.  The weakness within the bond market seems to be further fueled by profit taking as bond holders took advantage of highs not seen in more than 10 months.  With prices now beneath their 25-day moving average, the hope is that the 50 DMA will continue to hold.  If stocks are able to finally take a break from this run higher, we could see bonds benefit.  However, they will need to break above their 25 DMA to see any reasonable gains. 

 

Given the continued weakness in the bond market, we will maintain a locking bias.