24 Nov Sentiment can reverse quickly
Stock markets around the globe panicked following news of a Russian fighter jet being shot down by Greece. Given Russia’s recent aggressions, it is conceivable that Russia will find some way to even the score. That has investors concerned and has caused many to sell their riskier stock assets and move money into the bond market. This has helped stabilize mortgage bonds for the moment. If bonds are able to remain above the current floor of support, they could build up the strength needed to make a run at their 100 day moving average. However, with multiple layers of resistance just above their 100 DMA, a sustained rally will likely require more strength than bonds will be able to muster.
3rd quarter GPD was released this morning, coming in right at the markets expected level of 2.1%. Since this measures how much the economy has grown over the 3 month period, it is a true reflection of how well the US economy is currently performing. The somewhat anemic reading is an increase of 0.6% above the initial release, with the move higher mainly attributed to an increase in retained inventory levels ahead of the holiday shopping season. Regardless, it is clear that the US economy isn’t growing at the pace required to support significant growth. With wage increases still well below optimal levels, it could be a while before we see GDP make respectable gains.
Although there is little reason to lock at the moment, the potential for worthwhile gains to be made today above current levels are not likely. If you choose to float, do so carefully. Sentiment can reverse quickly.