Been one of those weekends where I have been all over the state. Just got back from Austin where I went to church, played some golf, and then went on a party boat for Britt's (Head of the $120 Billion Texas Teachers Retirement Fund) surprise 50th birthday party. It was fun.
The markets are once again way overbought right about at the same levels as they were 1.5 weeks ago at the major resistance levels between 1385 and 1400. Should be interesting. Friday was no doubt a bullish day. The bulls had alot to feel good about going over the weekend. Amazing for me how these type of things build my conviction in the opposite direction. As I said after the Bear Stearns thing we could go up to that 1440 to 1450 level but I still think the March lows will not be the lows for 2008. Who knows, we shall see.
Interesting article in the financial times pointing out that the huge sell off in treasuries caused mortgage rates to surge.
http://www.ft.com/cms/s/0/d6a06f34-0d85-11dd-b90a-0000779fd2ac.html
US mortgage rates soared this week after a dramatic sell-off in the Treasury market that hit housing sector recovery hopes even as it suggested investors were growing more confident in the medium-term US economic outlook.
The yield on the 10-year Treasury rose as high as 3.85 per cent on Friday from less than 3.50 per cent last week as investors sold bonds on expectations that the Federal Reserve could soon end its rate-cutting cycle.
Rates on 30-year fixed-rate mortgages rose to 5.87 per cent from 5.63 per cent a week ago, Bankrate.com said. Jumbo mortgages, those of more than $417,000, rose to 7.19 per cent from 7.06 per cent.
Naked capitalism had a good graph showing the mortgage rate over the last year. We are back in that January to mid February range.
http://2.bp.blogspot.com/_rWY3qGfe6gc/SAl3dCi-tJI/AAAAAAAAAOg/7iEBgoWoBIs/s1600-h/sg2008041835146.gif
It has been the question I have been asking myself lately. Okay the rosy scenario of a shallow recession and strong rebound in the second half is correct (don't think so but just for arguments sake) do the bulls realize how interest rates will respond? That will start killing growth prospects if gasoline and oil doesn't get it first.
Ambac reports before the bell on Wednesday. I am really interested to see what those numbers are going to be and how the market responds especially with the overbought conditions. I really have no idea though I think from a probabilistic scenario it will be negative. Once again time will tell.
Should be an interesting week.
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