19 Nov Stocks Get Hammered
Following another failed attempt to break above its 100-day moving average, the stock market is taking deep losses once again this morning. The stock market’s inability to break above this moving average is a sign of weakness that could become a more significant problem in the days and weeks to come. I personally believe that we are in the late stages of a bull market and even possible the early stages of a bear market. The 200-day moving average is the general indicator of a trend reversal. Stocks went several years without making a decisive break beneath this critical moving average. In recent weeks, stocks have decisively broken this barrier and remain unable to muster the strength to get back above. Could this be the end of one of the longest lasting bull markets in the history of the stock market? I believe it is entirely possible. This is good news for the longer-term direction of mortgage interest rates. Now is a great time to consider a no-cost mortgage when the time comes to lock in a rate.
Both the stock and bond markets are starting to see the reality of a pending recession. In looking back on economic history, there are plenty of parallels to historic pre-recession markets and today. I compare the current housing and stock markets to those of 2006, just prior to the near economic collapse we experienced from the last recession. We are now starting to see home builders come to grips with this reality, as well as other industries who are impacted during recessionary times. Let’s hope the Fed can raise rates a few more times before things get too bad. Otherwise, they will be limited as to the tools they can deploy to help the next recession not become overly extreme.
Although the stock market is under significant pressure, mortgage bonds aren’t showing the level of improvement you’d otherwise expect to see. If bonds can break the current ceiling that is holding them back, we could see a dramatic improvement to mortgage interest rates. In the meantime; there is risk of bonds being pushed lower. If you can closely monitor the markets, you can carefully float. However, if you aren’t a risk-taker, now is a great time to lock.