Don't Panic....

Yes, this is kind of a scary picture... but it is not as intimidating as you think if you know the fundamentals behind the movement represented in this graph. The free fall our market experienced yesterday at close is due to settlement which is the transition of the current note into the future note... in other words, yesterday the July coupon rolled into the August coupon. Futures 99% of the time trade lower than the current market coupon. Consequently when settlement occurs we see a fall in pricing.

As I mentioned this happens every month, so lenders are prepared of this revelation. As a result rate sheets this morning are not too off from yesterday's pricing, and at some lenders we have seen better pricing than yesterdays close despite this slide.

Regardless the fact we are two ticks down is not a good sign. Typically after settlement we see the market rally. Today our being two ticks down is a little unnerving. This is probably due to the rally occurring in the stock market today, and the treasury yield climbing.

Should this continue we may have cause to worry, in the meantime if you are floating be vigilant.

Below is a snapshot of the yearly... as you can see we are still enjoying highs, despite the slide due to settlement.

All things considered the next couple of days will be important to our re-establishing the upward trend. A rally today will prove difficult considering the markets are focused on earnings of publicly traded companies. We'd need to see some seriously week numbers moving forward for today's direction to turn.

I am looking for support today. Support today can lead to gains tomorrow.