Mortgage Bond Market Analysis - Breaking Out of the Trading Range

The good news is that it's Friday.  The bad news is that oil went the wrong way and took rates with it.  After Kuwait settled its oil strike, the experts assumed that oil would tank - and oil prices will likely decline in the near future with many experts forecasting new lows with Saudi Arabia and Russia ramping up their oil production - but when it was reported that US supplies had decreased, oil prices climbed higher and brought interest rates with it.

For the 4th day in a row, mortgage bond prices are down and oil is up.  The FNMA benchmark bond is down 52 basis points since its open on Tuesday - this is about .125% in rate.  The RSI is showing that the bond is significantly oversold but until oil decides to do an about face, I don't think this will matter.  Yesterday, Jobless Claims came in better (lower) than expected while the Philadelphia Fed Manufacturing Index came in much lower than expected at -1.6 vs. estimates of 8.9.  Traders are focused on oil and the good jobs numbers didn't distract from this focus.  On Wednesday I said to float with caution and to keep a close eye on my app (buyerZapp) in case the market moved against us.  It did when oil decided to climb higher and I sent an alert to lock.  A few minutes later I received a number of price change emails for the worse from the various banks I deal with.

I do expect that oil will sell off as inventories grow but no one knows exactly when that will be.  Until then, I recommend locking.  At a current price of 102.08, the benchmark bond is 10 basis points below the 2nd level of support.  The 100 day moving average is just slightly above 101.50 and that would be our next level of support for the time being, thought I don't expect a drop to that level.  Based on the way the chart looks so far this morning, I think that bonds will end up in the neighborhood they are in.  There is a bit of data coming out next week in addition to the Fed interest rate decision on Wednesday.  If you are not in a position to lock or if you just want to roll the dice, make sure you keep a close eye on my app - I will send lock alerts when the market moves (as long as I'm available - I'll be traveling on Monday so there will be no post but you can still get news relative to mortgage rates via the app).  You can download the link to the app by clicking on the icon in the upper right corner of my blog.  Make it a great day and a better weekend.