If you float, watch the market closely

Mortgage bonds broke above their 50-day moving average, as they continue to rally higher. If bonds can make a decisive break above this critical level, this will officially be considered a break out. Since break outs are rare, this is a very positive sign for the near-term direction of mortgage interest rates.  However, it’s still too early to pop the champagne bottle, as bonds could easily be pushed back below their 50 DMA. Much will depend upon the stock market’s performance, which is yet to open for the day. After experiencing their worst day of 2017 yesterday, stocks are looking to fall even more today.  If this happens, we could see the bond market continue to rally, helping soften mortgage interest rates in the process.

President Trump is facing what may be his greatest challenge since taking office, with his Obamacare repeal bill now under fire. This is a primary cause for yesterday’s stock market slump, as many are now questioning his ability to perform on his campaign promises. Further, the hopes of investors who wagered on Trump are largely evaporating, with multiple markets being impacted. Hopes of continued growth in the strength of the US dollar seem to also be diminishing, as dollar positions that accumulated in the aftermath of the election now appear to be completely unwound. All of this comes together to create the possibility of a short-term improvement to mortgage interest rates. If such a move happens, this is great news for summer homebuyers who have been in a panic over higher mortgage rates.

This is either the perfect time to lock or a great time to float. Only time will tell. If bonds remain above their 50 DMA, you should float. However, should they retract, lock.