22 Oct Stocks at Critical Point
With mortgage interest rates sitting right at seven-year high levels, it’s critical that bonds hold their ground and not fall any lower. If we do see bonds break lower, there is a lot of room for bond prices to move to the downside. This would put us at new multi-year high interest rates. Much of this will likely depend upon the near-term direction of the stock market. If stocks continue to fall, that could help support bond prices and allow mortgage interest rates to soften.
Stocks are once again texting their 200-day moving average. This has now happened multiple times in recent days. With each test, the support level become a little weaker. Since stocks have not decisively been beneath this critical level in many years, this could be an important time in stock market history. With the stock run exceeding ten years, we are getting closer to the point at which a downturn is imminent. All things must fall eventually. The stock market is no exception.
With bonds still trading in a predictable range, we are waiting to see which direction they will move next. I feel it is likely we will see rates get a little higher before improving. In the meantime, we will maintain a locking bias.