Yesterday, Mortgage Backed Securities closed up 24/32s.  Stocks had a not so good day (don’t look at your 401K).  The market responded to vagueness in the rescue package put forth by Treasury Secretary Geithner as it seems the market knew everything about what he was going to say before he said it.  Maybe he’s been spending too much time running Turbo Tax. 

Down 381 points on the big board, the Dow lost 4.6% of its value and the S & P nearly 5%.  One of the reasons for our rally, besides a little flight to quality, was the fact that Geithner’s plan called for less money to be tapped (350 million and maybe 500 million) than traders expected.  Another reason is that yesterday, the bears pushed the market right back to the November lows (high yield) but couldn’t take it out.  We call that a reversal from critical levels which in turn carried over into yesterday’s trade. 

On the close, note futures closed above the 8-day moving average for the first time since early January and eliminated the bearish trend.  It also completed a 4 wave down Elliot Wave correction.  Good start, but it does not mean we are out of the woods.  Simply puts the market back to neutral from bearish.  More work will need to be done (stability) for a more meaningful  rally to occur. 

What does this mean for mortgage pricing?  Early today, you may see a little better pricing followed by consolidation as traders position to take down the 10-year note auction.  Stocks will be the wild card.  Bad stocks, good for pricing.  Reversal in stocks, not so good for pricing. 

Great time to catch the bus you missed the last time around.  Overall, call it neutral with a slight edge to the bulls.