As we fade into the sunset, stocks had a terrible day while bonds, notes, and mortgage backs didn’t see their levels back off from the highs.  From a chartist perspective, we see the yield on the 10 year note heading for a target of 2.79% to 2.88%.  Now the question becomes how much lower can yields go?  They could go back to 2.09% (full retracement) but that would probably need a financial meltdown or sever double dip recession to be the catalyst.  Stocks are however looking for a bottom, one where investors will buy in size.  Don’t think we’ve found that yet.  Given that opinion and the weak economic data to support no or slow growth, yields appear to have not found a top.  As I learned early in my career, traders picking tops and bottoms is akin to dogs chasing cars.  Both just don’t last long.

The market, whether it be stocks or bonds will turn when the last one buys or sells.  Putting this nonsense into something useful for all of you, we believe a top or low yield mark is near.  Reasons being are low volume rallies in treasuries and widening spreads in mortgage backs.  Today for example, the 10 year note closed up 15/32’s (yield 2.93%) yet mortgage backs finished the day plus 3/32’s.  I don’t like that risk reward.  Next is a set of divergences that are starting to show up on hourly 10 year note charts.  Nothing huge but just maybe the market is getting a little stretched.

Great Austin mortgage rates should be with us well into the 3rd quarter or until you see strong hands get back into stocks or the employment picture start to improve.  Neither seem to be next week’s story.  As for me, my fingers are tired, needing to grab a cold glass of the grape to help them heal!  Have a great weekend.