Just when you thought issues in the Euro-zone were settling down, they don’t. Concerns that European governments haven’t overcome the debt crisis with Greece and the rest of the PIGS has investors scrambling for cover. Treasuries are also on the move due to an expected announcement that they will cut the size of future auctions given an improving economy and early bailout funds being repaid. Just when you think you have a clue about the market, it reminds you that you’re clueless.
We did have a couple of pieces of economic data today. Pending Home Sales jumped 5.3%. Credit the 8K buyers bonus for this one. Sales rose 13% in the South, 2% in the West, 1% in the Midwest, and fell 3.3% in the Northeast. Factory Orders were also on the move, up 1.3% as capital equipment and petroleum drove the numbers. The print was the largest jump in nearly two years. Strong economic data has taken a back seat to the Greek impact on debt. Traders are calling this “panic buying” as money and safety are joined at the hip. Technically, 10 year note futures have broken above the regression channel that has had a lid on the market for over a month. With futures trading at 108 06 (yield equivalent is 3.63%), the market is below the old resistance of 4.65% which points to further upside (rally) ahead. Keep in mind that when moves happen this quickly ( 10 year up 21/32’s and 30 year up 48/32’s) that oscillators and other studies will need time to catch up.
We expect at least a pause but most likely a little consolidation from current levels before another attempt to rally can occur. We would not like to see the market close above a yield of 3.65% as that level is now support. With stochastics and moving average crosses, odds are good we’ll push to lower yields and better Austin mortgage pricing. Improving economic conditions being trumped by a country one fifth the size of Texas. Go figure.