Safe play is to lock

Mortgage bonds continue to work their way higher again this morning, driving past the first layer of overhead resistance. If they are able to break above the 50-day moving average, we will officially have a break out. The stock market is down sharply, helping to funnel money into the bond market. For bonds to build the strength to break out, they will likely need for stocks to continue to fall lower. We must wait and see how the day plays out.

Today is again a slow day for economic news, so bonds will trade heavily based on the technical factors. With President Trump facing his most significant hurdle right now, the direction of stocks will be greatly impacted by the outcome of his health care bill.  The stock market is looking for the repeal of Obamacare to pass. If this fails to pass, stocks will suffer.

We are hopeful for a breakout. However, it still is a great risk. If you feel confident that Obamacare repeal will not take place, you may want to float and see how this plays out. However, the safe play remains to lock until bonds make a decisive move above their 50-day moving average.