That fact is evident in the four-week moving average which is now at its lowest level since September 2008.  Leading Economic Indicators were also on the docket, up .5% in October.  The monthly gain appears to be broad based, adding to the momentum of gains posted in the last two months.  Keep in mind that the release is thought of as a “rear view mirror” piece of data, one that traders typically push to the back burner.

Today’s Philly Fed Survey did the Gomer Pyle this morning, surprising to the upside in a big way.  The index jumped 21.5 points to 22.5, the best reading since April 2005.  Manufacturing, specifically the new orders component did the trick, rising from -5.0 to plus 10.4.

GM’s IPO, making the stock market giddy, hasn’t helped either.  The big board is plus 180.  Technically, we talked about the chart looking corrective in nature.  That was the correct call as yesterday’s rally could not even get to the 38% retracement level, falling short by a couple of 32’s.  The failure to penetrate that resistance brought in selling and pushed the market back into a bearish trend.

We feel that near term price action will focus on further downside (higher Austin mortgage rates/worse pricing) as we have yet to find a bottom. If there is a ray of hope, it will be that the 10 year note can hold at or below 2.95% (currently 2.93%).  Best bet for Texas mortgage borrowers is to stay defensive. Before the market picks your pocket, lock your mortgage loans with the float down option (“option to lower your interest rate one time”)!

Stocks are not the reason as we are off 139 points on the big board.  PPI, inflation at the wholesale level, is not the culprit either as the print was up .4% headline and down .6% ex-autos, giving some cover for the Fed’s pressing QE2.  October Industrial production hung an egg (unchanged) and the National Association of Home Builders Index was up slightly yet not very impressive.  Even the Fed buying 5.4 billion in paper can’t plug the dam.

What you have here is a mentality surrounding QE2 that is worried about inflation, economic growth, Federal balance sheets, and was priced in “before” the operation took place.  Now we have fast money accounts (trading accounts, hedge funds, money managers, etc.) pressing the trade, blowing through technical support levels like a tsunami.  Studies are bearish on every time frame.

Given the economic backdrop (high unemployment, etc.) we feel this move is close to a bottom.  Trouble is, picking bottoms are like catching falling knifes, hard to do without some pain.  Best bet for Austin mortgage borrowers is to use the float down option (“option to lower your interest rate one time”) to guard against a reversal (rally).

Markets like this are dangerous and sometime do not follow logic.  If it looks like a bear and walks like a bear, it probably is a bear.

Smooth line four week moving average is at 453K but is moving lower week by week.  Key for today will be the outcome of 29 billion in 7 year notes which will cross the auction block at high noon cst.  Technically, the 10 year candlestick chart has the makings of a bullish real body engulfing pattern which would limit further weakness.  On the other hand, Elliot Wave Theory points to an A wave which will take the market to targets I mentioned yesterday (2.78% on the 10 year note) before a B wave correction occurs.  “Real men and women” who use bar charts see shorter time frames (60 minute chart) oversold and due a small bounce.  That is what is happening now.  Longer term charts (daily) are still bearish and project a move to 2.78%.

As you can see, when multiple trading tools are not in harmony, nobody is happy.  Uncertainty leads to volatility and in this case, give the bears the edge.  Stocks will also be key, currently down a dozen on the big board.  Speaking of stocks, we feel that next week’s mid-term elections are priced in, reflecting a win for Republicans in the House (taking majority) but not in the Senate.  The political outcome would be gridlock, limiting spending/taxing/etc. as we move into 2011.  Outlier events would be a takeover of the Senate (very bullish for stocks/bearish for bonds) or not taking control of the House (bearish for stocks/bullish for bonds).

With the elections and the Fed meeting next week to hopefully clarify QE2, things could get wild.  We also have the Employment report for October a week from tomorrow.  Austin mortgage borrowers are advised to take advantage of any rate improvement we see as the skies have yet to clear.

Technically, market profile structure is bearish  following Monday/ Tuesday price action.  Sellers are in control of the market with additional downside (higher yield/worsening Austin mortgage pricing )  a high probability.

Best bet for Austin mortgage borrowers is to be defensive in this market!

Leading Economic Indicators were also released, up .3%.  This index has posted positive gains for the last three months yet the six month index is down .8%.  Doing better but a long way to go.  Last on the data plate was the Philly Fed Index which rose from minus .7 to plus 1.0.  Slow growth in manufacturing did the trick.

Stocks have been all over the board but holding a positive bias so far today.  The big board is up 102 points, primarily on the heels of solid earnings from Caterpillar and Mickey D’s.  Companies with global exposure are the place to be.  Bonds, notes, and mortgage backs are seeing some profit taking today.  Currently, the 10 year note is off 10/32’s while current coupon mortgage backs are off 7/32’s.  Mortgage backs have been trading like a roller coaster, down 10/32’s and then a minute later, down 4/32’s.

Weakness today has formed bearish divergences on the 60 minute chart.  ADX has turned bearish as well.  These signals hint that a new leg down is forming on the triangle pattern we follow.  Odds are starting to increase that the next move could send the 10 year note down another ½ point.  Austin mortgage borrowers are advised to be defensive. Stocks will be the key.  If they slip, we’ll do better.  Overall, QE2 will keep a floor under the market.  Just the same, we’ll need to deal with the volatility.

No matter what the reason, traders respected chart patterns which projected good support, allowing for a nice little rally this morning.  Buyers started the party in Tokyo and quickly transfered power to stateside traders, interested in buying 30 year bonds.  Since the early gains, the market has been back and forth on light volume yet holding most of today’s gains.  However, the caution flag is still out as the market has not been able to trade above the 8 day moving average.  We really need a close above this level to find our comfort zone.

We see the set up as neutral, given a multitude of bearish divergences on one side and Fed Chief Bernanke and his dollar printing press on the other.  Throw all the factors together and you can make a good case for the market and Austin mortgage pricing to stall unit early November’s elections and FOMC meeting.

Reaction, post auction has seen the 10 year note slip a few ticks, now off 18/32’s.  Mortgage backs are off 4/32’s, 1/32^nd worse than the pre-auction release.  Not much has changed with our bias which remains tactically neutral/bearish short term.  With another 13 billion of 30 year paper on the block tomorrow, choppy trading and volatile conditions will persist.

August ISM Non-manufacturing Index rounded out this week’s data, disappointing the economic bulls as it fell to 51.1.  Market reaction to all of the above was fast and furious with bonds, notes, and mortgage backs all taking it on the chin.  Stock futures rallied 10 points on the news.  Since then, the dust has settled.  Currently, the 10 year note is off 21/32’s, mortgage backs off 14/32’s and 10/32’s, and stocks are plus 55 on the big board.  Valuations seem about right as both bonds and stocks have come off their extremes.

I believe what you are seeing is a shift in market sentiment, one that will make stock traders feel better about taking on equity risk (buying stocks) while bond traders are feeling as if it’s time to lighten up fixed income ownership (selling bonds, notes, and mortgage backs) as risk premium is taken out of the market.  For Austin mortgage borrowers, this means we should see steady to higher interest rates going forward with intermittent rallies on bad economic data.

We’re not looking for a major shift in pricing or a new, long term bearish trend developing as the economy may be holding its own but still is weak.  Remember, we LOST 54K jobs.  That is not the making of a robust economy but it is better than we expected.  Technically, the chart fits our fundamental bias.  Daily trend signals will turn bearish after today’s close.  Divergences are all over the chart, most of which have now turned neutral to bearish.  What most likely will occur is the creation of a new trading range.  One with 2.75% as support and 2.50% as resistance (10 year note).  Chopping trading and mortgage pricing could be with us into the 4^th quarter given the good news/bad news we will see within economic data releases.

This is a time for Austin mortgage borrowers to be careful.  Take advantage of any rally the market gives you and get on the bus before it leaves the station.  Glad to see that the Carolinas didn’t fall into the ocean last night.  Take care on the east coast.

Currently, the 10 year note is down 37/32’s, the 30 year bond is off nearly 3 points, and mortgage backs (lower note rates) are off 22/32’s.  Stocks love the news, up 243 points on the Dow.  One report doesn’t turn the trend but at the same time, we have been warning about topping action and poor risk reward in gambling with this market.  Time for Austin mortgage borrowers to get a little defensive, looking to Friday’s employment report for a little more economic clarity.  Be careful out there.