MBS Day Ahead: Closer Look at Precedents For The Next Big Move

Yesterday, I mentioned that it was rare to see short-term momentum technicals consolidate in the center of their "overbought vs oversold" range. This refers to a fast stochastic oscillator--one of many ways that traders apply math the a time series of trading levels in order to more closely examine significance and probability. In short, when the stochastic lines are over their ceiling or under their floor, that particular market is thought to be overextended. The typical conclusion is that momentum is building for a move in the opposite direction. Of course this sort of witchcraft is far from a reliable predictor of the future. Still, when we consider the messages from momentum indicators in concert with a multitude of other analysis tools, we may be able to think and talk about...(read more)

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