MBS Week Ahead: Trend is Our Friend, Until It's Not

Posted To: MBS Commentary

One of my favorite wry market witticisms over the years is a variation of the seminal: " the trend is your friend ." This seemingly obvious, simplistic comment actually gives a nod to technical analysis in suggesting that the recent performance of a particular security is a worthwhile indication of its future potential. In other words: it's a positive sign when things have been positive. The extent to which that sounds like meaningless common sense gave rise to our addendum: "the trend is your friend, until it's not your friend any more ." Of course the trend can't always be your friend. Rates won't always fall, and the fact that they've been falling is nice in hindsight, but doesn't guarantee they'll continue to fall. At some point, the recently...(read more)

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