Technical Picture Continues to Drive Market

After hitting the bottom of the trading range yesterday, mortgage bonds make a technical bounce higher today. With bonds trading in such a tight range, the ceiling and floor are being hit quickly. This is a dream for day traders who place buy orders at the bottom of the range and sell when at the top, and it also provides a nice level of stability for mortgage interest rates that keep mortgage pricing in a tight range as well. Eventually, bonds will be forced to make a break to one direction or the other. Given that a growing population is now believing that a recession is coming, I continue to believe that we will see lower rates over time. When that happens is the unanswered question.

The stock market also has made a technical move lower. At this point, it has dropped down and is resting on its 100-day moving average. If I had to make a guess based on recent history, this level will not hold, and stocks will continue to slide lower. If this happens, mortgage bond pricing could receive support. Watch closely, because the near-term direction of mortgage interest rates could be on the line.

Although there is little reason to rush to lock, the potential gains to float are limited. Keep this in mind when making a float vs lock decision.