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May 28th Mortgage Bond Chart

Today I posted my mortgage market update for the day and recommended to FLOAT because we had tested a key level of support at the 200 day moving average which we did bounce off.  Just after 1pm, bonds did fall through that support and I changed my bias to a LOCK position, so I updated my blog to let people know .  Most lenders did reprice their rate sheet for the worse so it was the prudent advice.  The bond market did rally back however and close right above the 200 day moving average.  So tomorrow we should see some better pricing and if the PCE on Friday is in check even better pricing.
The chart above shows the Fannie Mae 5.5% coupon mortgage bond.  Each "candlestick" represents one trading day.  The green ones are days the close is above the open and the red are days the open is above the close.  The shaded in area is the open and close and the lines above and below are the high and low.  The circled candlestick on the right is today's, May 28th, 2008, trading day; as you can see the bonds dropped below the "S1" and "S2" (levels of support lines) during the day (that is when I recommend to ... more

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