Good Wednesday AM on this best day of the week,
Dan Rawitch shared a nice post this AM… I did say that bottom is choppy, but my goodness, if this in fact is bottom, it is not just choppy, it is more like surfing a tsunami! Something interesting is happening. In the last 5 minutes of each trading day, for the last three days, bonds are being aggressively purchased to the point of either being drastically up, as in Friday, to slightly up as in yesterday. Although, the MBS was more than just a little bit up. However, now we have a gap down and further pressure, for no reason at all. In fact, the ADP job report was pathetic and should be causing a rally. Bonds are so bearish, they are ignoring bond friendly news and over reacting to bad news. Not a good picture. The only thing that can stop this is the FED. The best quote I have heard in a long time is, ‘The bond market will not stop panicking until the Fed starts panicking!’ Last week, four Fed chiefs all spoke WAY too casually about the huge rise in bonds and in fact tried to put a positive spin around it. This angered the market, both bonds and stocks. This bubble will burst if rates get much above 1.50% for very long. Todays, ISM and ADP report further confirms the drum I have continually been beating on, which is that this economy is NOT on good footing and the yield curve needs to flatten! I remain bullish (but nervous) short term, bearish mid-term and bullish longer term.
I would continue to recommend locking.
Please remain safe and healthy, make today great!