13 Apr Stocks Get Ready to Battle
Stocks are facing a huge test today, as they are about to challenge some important ceilings of overhead resistance. Given the volatility within the markets as of late, it will be a major accomplishment is they are able to make a break higher. However, general rules would suggest they will fail this test and end up falling lower as the day wears on. That would help mortgage bonds. We will have to see how things play out today.
Mortgage bonds had a rough day yesterday. Bonds were forced to make a decision as to whether to break above the ceiling or fall beneath support. Unfortunately, they lost the battle and are now once again beneath their 25 day moving average. This is terrible news for mortgage interest rates, as they now have to face this critical level as a ceiling. It will likely take some dramatic news to help bonds improve. However, with the level of volatility in the stock market, combined with geopolitical news, anything is possible.
Unless bonds are able to break above their 25 day moving average, we will maintain our locking bias.