Mortgage Market Recap for the Week Ending 12/5/08

A new month, a new trend!

Last month many days were nail biters to see if the 200 day moving average would hold.  This past week, the question was: will the 10-day moving average hold.  The answer?  Mostly yes!

Here are the details of what happened in the mortgage market last week- along with my predictions for the coming week.

Fannie Mae Mortgage Backed Securities are back to surfing the 10-day moving average and that’s a good thing! Remember that up, or a higher price, is a good thing for mortgage rates. And down (or a lower price) is a bad thing for mortgage rates. Also remember, a green candle is a day where the security opens lower than its close. Red is the opposite. And intra-day is expressed by the candles.

With that in mind, let’s look at the candlestick chart below to see the exciting week in mortgage bonds.

You can see that technical support sits at $101.09 - and resistance at $102.03. That support held is a good thing. Earlier this week on twitter (www.twitter.com/ken_stone) I commented that I was looking at the 10-day moving average (the red line moving up above support) as a new line of technical support. Depends on how technical you want to be about whether this line of support held - Friday’s close was one basis point below the 10-day moving average.

So what will tomorrow and this coming week bring with mortgage rates? Good question - as always stay tuned for my updates on twitter - and weekly insights here.

I’m predicting that the 10-day MA will hold - mortgage bonds will climb back on board and ride that sucker higher. And I’m predicting the 10-day wins over resistance - pushing rates down to new lows this coming week.

My thinking here is based on tested support this week (including no intra-day move below support at $101.09) - and the emergence of the 10-day above support.

Stay tuned to see if I’m right!

Thanks for reading!

I’ll post back soon,

Ken