20 Nov Strong Locking Bias
Stocks pushed slightly higher this morning, but mortgage bonds are under pressure and remain firmly below price resistance of the 200 day moving average for now. For economic reports, CPI was slightly lower than expected due to falling gas prices, and apparently, consumers put that savings towards retail sales. The inflation component was again, not a factor. Existing Home Sales were slightly off for October as well. With no big surprises today, investors will anticipate tomorrow’s PPI, and hope for business as usual… Meaning ongoing QE, as Janet Yellens confirmation appear to be moving along without resistance. Investors see this as a dovish continuation of the current Federal Reserve perspective. The gap between the 50 and 200 DMA is tightening, so we anticipate a break above or below. Given that we have had two failed attempts to break through the 200 DMA, the resistance will be difficult to penetrate. Today’s failed attempt resulted in a swift move down. We are hoping the damage is done, so we will suggest a cautious floating bias as long as prices can sustain above the 50DMA. If this support breaks, we will shift to a locking bias.