12 Jan Volatile market
Stocks are lower in pre-market trading this morning. This is helping support mortgage bonds as they continue to trade within their upward trending channel. Since December 15th, mortgage bonds have been on a very strong rally, making up nearly 50% of the combined losses they suffered following the presidential election. If we can break above the 50% Fibonacci level, this will be an extremely positive sign for the near-term direction of mortgage interest rates. However, if bonds follow the expected rule, they will not be able to simply break through this barrier. Therefore, we continue to be at risk of a pull back at current levels.
Yesterday’s press conference held by incoming President Donald Trump gave the markets very little reason to celebrate, causing stocks and the dollar to suffer. In his talk, there was very little said to provide investors hope that his policies will help stimulate continued growth in the US economy. Many investors were hoping that there would be statements to support the significant increase in the US stock market since his election in early November. Since the growth in the stock market was greatly responsible for mortgage interest rates moving higher, the lackluster feeling left in the minds of investors helped support mortgage interest rates.
Although mortgage bonds have been improving, we remain at great risk of prices moving lower. If the stock market continues to fall, there is no need to immediately lock. However, if the market changes, we will switch to a locking bias.