Government Shutdown Now in Third Day

US stock markets shook off the reality of the Federal Government entering its third day of a shut down, with the S&P 500 and NASDAQ hitting new all-time record high levels this morning.  The shutdown is not expected to cause too much of an impact to the financial markets, as long as it doesn’t extend for too long.  With many Federal employees not able to work, social media is standing up in defense of those who rely on Federal wages to support their families.  However, it is almost guaranteed that back wages will be paid for the time of the shutdown. 

Both mortgage bonds and the 10 Year Treasury Note have broken beneath significant support levels and will now face these levels as ceilings of resistance.  The one thing I know is that bonds will eventually stabilize and recover at least some of their losses.  Although there is no way to say at what point bonds have reached that level, they will likely recover at least 50% of their losses.  That would be in line with a typical correction.  Although we never want to bet against the U.S. economy, a lower than anticipated 4^th Quarter GDP report is what will help bonds.  We will see if we get that later this week.

Hopefully things will get better soon.  However, in the meantime, we will maintain our locking bias.