MBS CLOSE: August Highs... Any Higher? (part 2)
Cat Stevens was so close... If he had but included the word "trader's," his uber-hit could be dusted off and added to the market theme song shelf. I suppose he could also have replace the word "world" with "market" and acheived a similar effect. Whatever markets are doing and getting ready to do is wild--NOT "wild" in the sense of outrageous--but rather in the sense that it's just terribly terribly fascinating. Good-bye August:
Yeah, I know... That DOES look like a "bottoming out" on the yellow line--our benchmark big brother, 10 yr tsy's... Maybe even the bottom of a parabolic turn around... Conversely, although late August was more about the range, there are some currents at play that make that as well look like a parabolic turn around. What's MG smoking? You know parabola from your graphic calculators that you either used in high school trig or bought your kids for high school trig depending on your age bracket? Same thing here, just looks like MBS action would fit nicely inside a giant St. Louis Arch since the 7th, no?
Here's the imaginary lines I see, particularly over the last few weeks...
Does this mean things are turning around? Should I lock? OMG... OMG! I'm freaking out! Mortgage rates are going up! Matt said so!!!!! AARHRHRGGGHHHH!
<SPLASH!> goes the bucket of cold water on your head...
This likely isn't the end of good rates. It doesn't even necessarily mean rates are going to get worse next week. The point with this technical analysis of price curves etc... is to aid in hedging our pipelines. The point of this particular analysis is to reiterate the cautionary sentiments that AQ and I have been sharing recently. Like we've been saying again and again, BETTING ON THE RANGE TRADE IS SAFER THAN BETTING ON IT BEING BROKEN. Result: we spent less than 3 hours out of the last 10 days outside the range. That's better than 96% of our time spend INSIDE the range. That's an "A" folks... I wish we could take the credit for earning that grade, but just as a moderately bright student gets a good grade on a paper by regurgitating wisdom, that's really all we've done. The onset of technical patterns in the absence of volume and guidance was so extreme that it would have been hard not to acknowledge it...
Technical patterns? What's that? Computerized trading models? Varsity traders leaving a set of house rules for JV traders over the summer? Yeah yeah yeah... We know it's not as simple as that... But IN A GENERAL SENSE, without certainty about the the medium term recovery prospects, the market has been left to play it safe all summer--the trader's sandbox if you will. Don't go too much higher than 101-15 or too much lower than 99-00. Data is removed from the picture to such a great extent that (and I know some of the "yoda's" watching from afar will either groan, or scratch their chin at this one), the MBS action IS indeed taking on a sort of fractal nature. Best shown with the following quiz.
MBS COMMENTARY SUMMER FINAL QUIZ:
1. Which of the following best describes the following two charts (seriously make a note of your first REAL guess.... I want to know in the COMMENTS section!):
- A) They both show the same dates but with different intervals (i.e. one is hourly and one is minute by minute)
- B) They show two out of the several similar days we've had recently where AM data seemingly hurts prices, but they recover by the afternoon...
- C) One shows the month of August whereas the other one shows the entire summer...
- D) They're similar Matt! We get it! Just tell us what they are so I can go start supporting my local chapter of AMBA (an offshoot of the original AA).
ANSWER?
I don't know, it's probably all of the above, so it doesn't matter, you're all right. In this case, #1 is August as you may be able to see it's the same chart from the top of the page, but with a longer interval in between points (smoothed out). #2 might not be so readily apparent given this week's conversations and charts. So we'll unveil the #3 chart by simply adding in the dates and prices...
Wow, just wow...
I got nothing else folks...
try to lock more at the highs and float more at the lows...