Stocks Look to Challenge All-Time High Levels

Stocks are climbing higher once again in early market trading. The stock market is now just beneath all-time high levels, and investors could be ready to challenge this level today. If stocks do make a decisive break above this critical level, history shows that the market will make a strong move above the prior ceiling to establish a new record in unchartered territory. However, history also shows that shortly after making a new record, the stock market takes a significant hit before regaining the strength to stabilize and move higher once more. At this point, we are closely watching for when stocks top out. At that time, we will likely see mortgage rates get some relief. I anticipate this won’t take too many days / weeks.

After breaking beneath their 100- day moving average yesterday, mortgage bonds are holding their ground so far this morning. With the 10 Year Treasury Note yield beneath two critical ceilings, the bond support will help prevent mortgage interest rates from jumping up. Now if the 10 YTN yield happens to move above these ceilings, mortgage interest rates will likely move higher as well. Although the two markets aren’t directly related, they certainly tend to move in the same direction most of the time. From that standpoint, they can benefit when one has strong support preventing rates from moving higher and the other doesn’t.

Until we see signs of significant strength in the bond market, we will maintain a locking bias.