Wednesday 8/20 ... AT A GLANCE

By: Matthew Graham •
  • Further Freak-outs for financials, fannie, freddie,
    • Downgrades and negative analyst commentary abound about the entire financial sector, particulary, GSE's coughed up another c.20% this morning.  Unconfirmed reports of Freddie having secret meeting with Fed. 
  • Mortgage Applications (down miserably, surprised?) and an oil reserves report are the only scheduled data for today
  • spreads widened on negative financial and GSE news, but price is still improved 2-4 ticks this morning in choppy trading.
  • 6.0's currently at 100-13.  Technical analysts will be excited to note that this puts us above the 50 day moving average.
  • Tick for tick, MBS seems like they've done most of their widening for the day, so stocks and treasuries can give us further clues as to market direction.
  • LOCK/FLOAT
    • Candle patterns were weak last night despite the 3 days of gains.  The deceleration of the candle strength suggests a reversal today, but I think we'd have to see bonds turn negative before that risk materializes.  Whatever the case, just like anything in life, the more consecutive days something has gone with a winning streak, the less and less likely it can continue.  For instance, you'd have to go back about 2 months to find the last time MBS had 4 winning days in a row.  Today would be our fifth if we hold gains.
    • Nonetheless, I remain long on MBS until we get a headline on the GSE's that actually raises my pulse.  Hey!  That could be tomorrow, or it could be never.  Equal chances!
    • But should YOU remain long?  We're getting into riskier territory for short term lock decisions.  But as we are in a period with historically improving prices, floaters that are not forced into a near term doc order will likely see the same or better price levels as we have this morning.