Let's look at the Banking Index to see how far down it might go, and what is likely to happen to Mortgage rates now ...

As you know from our previous reporting, the Banking Index has been in a capitulation sell off.  (Symbol: $BKX)

Yesterday, the index closed at the 58.13.  That was significant, because now it has been below both 2002 support levels for two days.

Its next support is a 1998 support at 54.57.  Here is where the Banking Index needs to hold, or there will be significant downside pressure on the other indexes. 

What about Mortgages rates?  See the next chart ...

This is a 60 minute chart of the TYX ... the 30 year Bond Yields.

Note that between November and March, an inverted Head & Shoulder pattern formed. That set up the 30 year yields to move up sharply as it did. 

It just finished making a higher/high and is now pulling back.  We expect this drop to make a higher/low which will set up the 30 yields to move upwards towards its Head & Shoulder projection of 53 in the coming months.

Meanwhile, it means that 30 year mortgage rates will try to find a bottom here with a very oversold RSI level.  After the TYX finds a bottom, it should then move up and make a higher high ... that would mean that the current mortgage rates are more likely to rise now, rather than fall much lower.

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