Sitting here this morning, sipping my coffee, scouring the financial news and watching mortgage bonds trade. Rainy outside, blah. I guess the rain of this week should setup some green grass outside soon.
So, here it is Tuesday and a slow news day for the markets today. In these cases the technicals drive the trading activity for equities and bonds.
Mortgage bonds have traded higher the past few days, sending mortgage rates back to several month lows. More importantly, mortgage bonds have moved back above their 200 day moving average which has been acting as price resistance since December.
Stocks continue their upside ride, moving up within a narrow channel of price movement, for the Dow Jones Industrial Average and the Nasdaq Composite.
What's ahead? Some possible big news events that may turn into catalysts of big moves.
What is the news?
Well, on Wednesday we will get the Fed's minutes of their most recent policy meeting. The language of those minutes will be read closely for clues to the continuation of Quantitative Easing and their continued purchasing of mortgage bonds on the open market.
Also, have you seen the political banter between North Korea and South Korea (an by default, the United States)? Who knows what will happen but any major escalation of the conflict from words to armed conflict would definitely take stocks down and move bonds up.
The technical landscape is ripe for bonds to go higher and a 10% or so pullback in the equity markets. All these markets need are the right fundamental event, a news event, and the spark for such a move exists.
That is the takeaway on the markets for now.
BG
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