The initial reports from Black Fridaysales looked pretty good to me. 10.6 Billion in sales, up 3% from last year. Although this is on the lower side of some analysts expectations, it’s on the way-high side of many others thoughts that this would be the worst Black Friday in decades. To me, this is great NEWS! Let me explain why…
It was pretty clear, after being up for 5 straight days, the Dow Jones Industrial Average was running out of steam. One thing most people don’t catch is when the “Big Money” on Wall Street walks-it-up or buys big quantities in short spurts to make the rest of the market catch the wave and go higher. Essentially, they run it up so they can then knock it back down.
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I was completely expecting that we would see a pretty big week for the downside, but with these figures, it’s possible we will get a stay of execution. However, if you look at the Economic Calendar, there is a lot of information coming this week that could give the Market plenty of reason to Sell instead of Buy.
Pay close attention to what’s going on if you have a long-term horizon for financing. If you’re in the process of financing, make sure you get locked in immediately. Stay tuned, more to come.
The shift to lower mortgage rates that occurred earlier this week is likely to be short-lived. I encourage everyone to take advantage as soon as possible. Every time we see a spike like this, we give the gains back and then some over the short-run. I do believe it’s still likely to see lower rates in the long-term, but if you’re looking to refinance or purchase in the near-term, lock in asap.
Mortgage Bonds rally heavily from our previously discussed box trade. It took almost four weeks for this to take place, but as you can see, it worked perfectly and everyone who played it right made a killing once the prices moved above the high part of the box.
Look at the chart below. Notice that we didn’t close near the daily highs, but we made an important break through the downward trendline and all the moving average convergence we’ve been dealing with over the last several weeks.
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30 year rates were as low as 5.25% today. I highly recommend taking advantage of this. Although a lot of the indicators are pointing toward lower rates in the long-run, history has proven that when these opportunities come, you take advantage of them.
I know you all appreciate my sarcasm and that’s why I’m so consistent with it. Today will be more of a trading lesson than anything. We have a very classic situation setting up here. Take a look at the chart.
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Ok, this is a classic “box play” setup that I’ve written about in months past. What’s happening on this chart? The most important thing to notice is how tight the support and resistence is… Look at how close R1 is to S1. Notice how the Moving Averages are getting bunched up together within that range.
The only thing you can get from this formation is that we’re going to see a break-out one way or the other. We’re going to go substantially higher or substantially lower. We don’t know how long we’ll be trading within the box itself, but we know once we breach it, there’s nothing to keep it from continuing in that direction.
The Trade is this. Put a buy-stop order 15 basis points above R2 and a sell-stop order at $99. We know that if the prices get to either point they are likely to head further in that direction drastically. Each order opposite serves as a stop-loss order for the other. All you do is put the two orders in and just let it ride.
My prediction is for higher bond prices and lower mortgage rates over the next 12-18 months. However, you never know when you’re going to get a bump in the road. I would be prepared for anything these days. Locking if you have a short-term timeframe is the wisest move right now. If you’re not in a hurry, I think waiting is prudent.
Barack Obama was elected as the next President of the United States last night. This very important action for the financial markets gives us a perfect example to illustrate how the markets work.
Of course, everyone has this big idea that Barack Obama is going to be able to turn this country around in the blink of an eye and unfortunately, this will cause huge disappointment in the near future. We’ll get to that in a second.
As of the market close yesterday, The Dow Jones Industrial Average was up 1500 straight points over a 3 day period and Mortgage Bonds were up over 100 basis points in just one day. How come? Everyone was already planning on Obama winning the election. Remember, the markets are always “forward-looking”. They price in tomorrows NEWS today. That’s how it works.
Today, we’re seeing the Dow Jones trade 250 points lower. This is what happens after all the buyers fill their positions and step back for a second. They realize that it’s going to take a significant amount of time before the real impact of the new President can be felt. So, they start scaling out of their positions and send the market lower.
This is good for Mortgage Bonds though. In fact, this is where the majority of that money will go. Just look at today’s Bond Chart. Amazing two-day run. Because of this, I recommend that you LOCK anything that’s anywhere near closing. We’re trading above all 4 major moving averages. This is historically an excellent time to take advantage of lower rates.
Today’s the day we’ve all been waiting for… It’s time to get the evil man Bush out of office. That will fix all of our problems. (Sarcasm)
The Financial Markets will be very light in activity and volume today because of the Election, but will pick up huge steam tomorrow after the results are finalized.
Personally, I think it will be closer than most anticipate, but I do agree with most polls that Obama is likely to win. My prediction is that McCain will get over 200 electoral votes, but that Obama will have the 270 so quickly that it won’t matter by the time he gets there.
A quick look at the Mortgage Bond chart shows we’re up 47 basis points on the day, but with light volume this literally means nothing. We could be up 100 on this volume and we wouldn’t see new rates posted.
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Click HERE for the latest election info. Stay tuned. Much more to come.
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