So far this morning, stocks are recovering from yesterday’s losses and bonds are losing some of their gains. Today is again one with few economic reports,
so the technical picture will likely dominate the trading day. The good news is that bonds remain above their 200 day moving average and appear
to be in the early stages of creating an upward trading channel. They have moved in a relatively sideways pattern right out of the steep downward
trend that slaughtered bonds for weeks. It appears that bonds finally found a bottom and can now start to move higher. Hopefully this will
continue and allow mortgage interest rates to recover some of their losses.
Mortgage Application Data released by the Mortgage Bankers Association revealed that mortgage applications have decreased by a whopping 10% in the past
few weeks. This is clearly a result of higher mortgage interest rates. The good news is that purchase applications are actually up 14%
from where they were last year at this time. This is a nice move higher and certainly welcome news as we move into purchase season.
With bonds now trading outside of the downward channel, we can carefully float to see if they have the strength to make a run higher. We must be
cautious at this point. It is certainly possible for bonds to fall back into their downward channel. If you choose to float, watch the
market closely. Sentiment can reverse quickly.