It’s been a busy Monday in the market. Stocks caught an early bid on the heels of some upgrades on financial stocks and a better than expected earnings report from Lowe’s. The only news of the day came via the National Association of Home Builders/Wells Fargo Housing Market Index which rose 2 points to 16. Seems as if homebuilder’s confidence is slowly creeping back into the market.
After a flat opening in notes and mortgage backs, traders quickly turned sellers. Currently we are feeling the effects of a 200 point plus rally in stocks, sending the 10 year note down 21/32’s (yield 3.21%) while mortgage backs are off 8/32’s. We view the selling as more corrective in nature since daily chart studies still maintain their bullish bias.
Buy signals on daily oscillators are good and trend signals are not active, adding further evidence to our consolidative/bullish lean. The calendar this week is light with only New Residential Construction, FOMC minutes, and Weekly Claims to move the market. Expect our pricing to hold if we can stay below 3.25% on the 10 year note. Watch stocks as well. Their direction will create an opposite reaction/direction for mortgage pricing.