11 Aug Locking Stance
The stock market was able to find its footing after it bounced off support at its 100 day moving average on Friday. However, stocks could be taking a break in an overall downward channel. It is too early to say for sure what the near future has in store for stocks. One think is for certain; today and tomorrow’s trading will be critical for both the stock and bond markets. Since the two markets compete for investment dollars, if the stock market’s reversal to the upside is confirmed, it will come at the detriment of bond pricing and interest rates.
Today is a quiet economic news day, so the technical will likely drive the markets. As mentioned above, the direction of the stock market will likely drive the direction of mortgage rates. So far this morning, both stocks and bonds are higher. However, the advantage certainly will go to the stock market today, as the technical picture for stocks is much nicer than it is for bonds. Mortgage bonds are just beneath their 25 and 50 day moving averages. If they fail to move higher, they will likely be pushed lower in a hurry.
With bonds facing stiff resistance overhead, and with stocks regaining strength, we are going to suggest a locking bias. If stocks fail to make a decisive move higher, that would help push bonds higher and continue the low rates we have enjoyed lately. Watch the stock market closely the next couple of days, as it will likely influence mortgage rates in the near term. With all of the geo-political challenges in Russia and Iraq, markets can move quickly.