Sorry — this post was from yesterday — couldn’t get to WordPress!
Here it is:
With 5 minutes to go, stocks have rallied back from down over 150 points to nearly unchanged. With that trade, bonds set sail, falling off a cliff on the chart. Currently, the 10 year note is down 39/32’s (yield 2.94%) while mortgage backs are off 3/4th of a point.
We talked earlier about a close above 2.90% (yield) giving traders what we call a “breakout” pattern. Unfortunately, this will come to fruition, unless something miraculous happens in the last hour of cash trading. Given the breakout pattern is in vogue, the next target would be 2.99%-3.0% in yield on the 10 year note. The bearish tone is endorsed by sell signals on hourly charts but daily charts have not yet made a strong commitment.
Elliot wave patterns are also looking for a 5th wave high (rally) so there is hope. Expect mortgage pricing to worsen by at least another .50% over the next day or two (trading to the target of 3.0%) before any attempt at a rally will be made. We do however, expect the lower levels to hold and better mortgage pricing to emerge into next week, based solely on the weak economy and Treasury participation to help keep mortgage rates low.
Hang in there.