Markets Looking for Direction

Both stocks and mortgage bond prices are relatively flat so far today, as both markets sit in the middle of wide trading ranges. The challenges with being in the middle are that volatility can be exacerbated, causing wide swings in one direction or the other. It seems that with little news driving the markets, they are watching each other closely to help decide which direction to take. Given that the technical picture for mortgage bonds is not favorable now, the next major move could be an unfavorable one. However, if the 100-day moving average holds, mortgage interest rates should be somewhat stable. If this level does fail, rates will most certainly take a step higher.

This morning’s Initial Unemployment Claims number came in well below what the market anticipated. However, economists clearly weren’t considering the impact to a company for making layoffs just before Christmas when they came up with their estimates. There is a stigma around businesses that fire people just before Christmas, which keeps many people who should be fired still employed until after the New Year. So realistically, the number of new Unemployment Claims will be lower throughout the end of December. Once we get into mid-January, watch out. We could see a pent-up demand of layoffs hit the market at once, which will contribute to the first quarter of 2019 starting out on shaky ground.

Once again, we will maintain our locking bias.