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.

Other reasons for this psycho trading environment is that supply in the form of 2’s, 5’s, and 7 year notes (109 billion) will hit the street Tuesday/Thursday, last of the big vacation weeks is next week with many trading desks occupied by junior traders, and with such a nice run in treasuries, many are hitting the cash register (selling) to book profits.  Technically, the chart looks like a dog. Nothing huge, maybe something on the order of a Chihuahua.

The day started off at better levels than yesterday only to close at level exceeding the worst levels printed yesterday.  Typically, these are warning signals of bearish behavior starting to gain confidence.  Another warning sign is that we closed below the eight day moving average and at the lowest closing level in 6 sessions.  Trend Intensity will keep its bullish signal but is in danger of failing if buying does not happen quickly next week.  Not doom and gloom as we head for the saloon, just a heads up to be careful.

Big picture still suggests low Austin mortgage rates will be with us for some time to come.  Just get used to the volatility.  Have a great weekend.

Then along came New Home Sales, expected to be 320K annualized units.  The print was much better than that, up 24% to 330K units.  Stocks got another boost (now up 68 on the big board) as fixed income instruments (such as mortgage backs) dipped a little deeper.  Currently, the 10 year note is off 10/32’s (yield 3.03%) while MBS are off 4/32’s (tighter spreads which is good).  We also had the Chicago Fed National Activity Index out, which dropped .94 to its worst level since October.  Manufacturing output, or the lack thereof, did the trick.

Fast money is selling the long end of the curve, dragging the 10 year note along with it.  Not a lot of downside is expected from here.  The week ahead will feature Case Shiller Home Prices, Consumer Confidence, Durable Goods, Weekly Claims, and GDP on Friday.  Good week for data and market moving volatility.  For the week ahead, we see the market weaving and bobbing with a neutral/bearish type bias as investors will be looking to buy treasuries at yields slightly higher than current.  We still like the market long term as the detours are everywhere.

Short term, Austin mortgage borrowers are encouragerd to stay defensive.

In the glass half full category, Ford, Chrysler, and GM all posted sales gains as that sector starts to stabilize.  Currently, stocks are off 61 points on the big board, 10 year note is plus 8/32’s, and mortgage backs are off 2 to 5/32’s, depending on the interest rate.  As I have talked about in the past, money flows are coming out of foreign sovereign debt and into treasuries.  Trouble is, that’s as far as the money goes.  Risk/reward is moving more and more towards risk in MBS, corporate paper, and anything other than an instrument backed by the full faith of Uncle Sam.  With stocks trading firmly below 1040 on the S&P chart, investors are net bearish, looking for a pull back to 940/970.  That would clip the Dow for 1 large.  Add to it the uncertainty of tomorrow’s Employment Report and all you see is traders with a fist full of scared money.

Speaking of the jobs number, the call is for job losses of 100K.  We’ll preview the report later today.  Given what we know, we see the pull back in mortgage paper (higher Austin mortgage rates,  lower pricing) as nothing more than consolidation, expecting that it will not become a major reversal.  However, we are seeing a divergence set up on the daily chart, telling you that a least a pause is in order until tomorrow’s fireworks begin (7:30 am cst).

With risk reward not in your favor, Austin borrowers are advised to lock in their Austin mortgage interest rates and step aside as we’re not sure whether the light in the tunnel is the end or a train.

Continuing Claims rose as well, up 88K on the week. CPI, inflation at the consumer level fell .2% with the core index up .1%. Just like PPI, nothing in the cards here to rattle the Fed. Philly Fed was also on tap, falling like a rock from 21.4 to 8. Employment indicators within the index did the damage, falling 1.7 points.

Last but not least, Leading Indicators rose .4% in May. Nothing special here as this index is widely treated as “rear view mirror” data and typically kicked to the curb. Overall, what is starting to take shape is a weakening situation in both housing and employment, coupled with falling consumer confidence. The BP mess doesn’t help either as the sickening scene from continued oil flowing does nothing for one’s psyche.

Market’s are red hot for bond bulls and woe is me for stock holders. Dow off 50 points has led the 10 year note higher by 20/32’s (yield 3.21%). Mortgage backs are plus 11/32’s, having a nice day as well. Technically, prices are nearing the best levels of the year (3.14% yield). Bulls will need to close below that level (3.13% or lower) to break out of the triangle pattern we’ve had in place since May. Daily oscillators however are bearish so overall, we do not have all time frames in harmony.

In English, it will become more and more difficult to improve Austin mortgage pricing/ lower yields without new fuel (catalyst). At the same time, the economic fundaments do not support higher Austin mortgage rates or worsening mortgage pricing. So, expect Austin mortgage rates to stay low for some time to come. Stay tuned for tomorrow.

Earlier today, Pending Home Sales hit a 6 month high, up 6.0%.  Funny what 8K can do to a person.  Every region of the country except the South had nice gains.  The Northeast led the way at plus 29.5%.  For the most part, we continue this risk aversion trade, continuing to struggle with European debt issues and softening growth in China.  On the debt front, those sick and hurt countries need to roll over 30 billion Euro in debt this month and 500 billion in July.  I wonder who will show up to buy the paper.

At home, the economic data continues to show stability and slight growth as the days and  weeks pass.  Friday’s Employment data will be huge.  Some are calling for as much as 600K new jobs created.  Keep this in mind today and tomorrow as a print of that magnitude will raise holy H E double hockey sticks with Austin mortgage pricing. Be square or beware.  We’ll handicap the report tomorrow.

Technically, the chart is telling us to be cautious.  Sellers have been dominate the past two days, pushing sell signals into play on the daily 10 year note chart.  Oscillators have rolled over to the bearish camp as well, stalling from midrange levels.  Nothing huge here but a bearish feel is setting up and into payrolls, we could see traders square up, pushing yields a touch higher.  With the run we’ve had, best bet is not to throw caution to the wind come Friday morning’s data.

Austin borrowers have seen how powerful the exclusive PrimLending Float Down Program can be.  Use it.

That bullish momentum has been challenged as we are now trading at 3.86%.  Technically savvy traders call the formation a “double top” that you can see by the horizontal line across the top.  Confirmation is now being made as we have taken out the base from which the last leg of this rally started.  In chart terms you can see this is the level below 116 10 (closed futures session at 116 09).  Traders call this a “bear trap”, stranding the bulls on the expected breakout above 116 10.  Further confirmation of the next move being to worsening Austin mortgage pricing can be found in the fact that we failed to hold above both the 8 day and 21 day moving averages.  They cross the right side of the chart at 116 12.  SStochs have also made a bearish cross.

In proper context, the selling today has been a function of overbought readings and the need for consolidation.  We do not think its anything huge but will most likely correct to 115 31 on the chart (yield equivalent of 3.92%).  Mortgage backs are now down 11/32’s on the day and will probably give up at least another 8/32’s before we reach our target.  Time to be careful out there.