After yesterday’s FOMC meeting, it became apparent that the Fed would pull out all the stops in an effort to get the economy and employment going again.  “Asset” purchases are all the rage as the government is once again the buyer of choice (treasuries).  Stocks love the idea of free money and a weakening dollars, boosting value in equities across the board.

Gold is up $40.00 as well, pricing in heightened expectations of inflation down the road.  Seems to me that the Chairman and the Prez met by the water cooler and the conversation when something like this.  “Ben, I’m in a tough spot here, my party just got its head handed to it and unemployment is nearly 10%, now I’m not telling you what to do but……… I need a game changer.  What you say we fire up the printing press and go on a buying spree.  Just a thought.”

In the news, Weekly Unemployment Claims jumped 20K to 457K while 3^rd Quarter Productivity rose 1.9%.  No one noticed as traders were too busy trying to buy bonds and stocks.  With the Employment Report for October due out at 7:30 am cst tomorrow, the prudent thing for Austin mortgage borrowers is to lock their Austin mortgage rates now.

Given that we are at the best levels in a month, your timing couldn’t be better in front of such a high profile release.  We’ll preview the Employment Report early this afternoon.

Technically, trading has been a whipsaw affair.  You will notice the downdraft yesterday (post FOMC) and the reversal this morning.  Typically a good indication the market has run its course in the short run, especially in front of the high profile data coming tomorrow.  Just the same, this baby is a bull and will be well supported into year-end given the Fed and their reloaded check book.  Call the market neutral/bullish.  Take advantage as the Employment trade is always volatile.

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.

Overall, we see continued low Austin interest rates on mortgages and historically low yields on treasuries well into the 4^th quarter.  The market is however forming a huge bond bubble that will someday create a massive correction.  That day is not today or tomorrow.

Technically, the rally from yesterday’s lows will add support towards further advancement (better pricing).  Stability at the 8 day moving average is supportive as well.  Oscillators are telling a different story.  One that reflects a lack of conviction to the bullish case.  In other words, the bull is due a nap.

Call the market at value, not expecting much movement either way.   Maybe early 2011 we’ll see the economic winds change direction.  We’ll wrap this up as the ice cubes marinate later today.

Earlier today, CPI, inflation at the consumer level, hit the tape plus .3% while the core index was up .1%.  Auto prices and gasoline were all to do about the increase which in the big picture is quite tame.  Actually, our bigger concern is about disinflation as the economy cools.  Retail Sales were also in the mix, up .4% with the ex-autos component up .2%.  Auto sales were behind most of the push here as well, rising 1.6%.  While the numbers look encouraging on the surface, we see the loss of Census workers, loss of emergency unemployment benefits, and the withdrawal of various forms of stimulus starting to drag on the consumer.  Retailers will need a great holiday season to make it a good year.

Business Inventories completed the economic trifecta, rising .3% as sales fell .6%.  We talked about this earlier in the week, commenting about inventory builds with sales faltering.  Not a good prescription for GDP.  Trading, post data has been a light volume affair with the 10 year note up 8/32’s, mortgage backs unchanged to up 2/32’s, and stocks down 22 on the big board.  We expect a quiet day with a neutral bias.

We see a ton of pessimism build into pricing  which could limit further rallies but at the same time, any dips will be a buying opportunity for investors.  Given the auction paper to digest and the soft economic background, we expect the market to trade in a small range with a bullish bias, allowing for Austin mortgage pricing to be slightly better or worse from today’s levels over the next week or so.  We’ll wrap it up later today.

Last bit of news today was the Univ. of Michigan Sentiment, posting a print of 67.8.  This was significantly lower than the June print of 76 and was the lowest result since November.  Stock market volatility may have contributed, as consumers continue to say they are depressed despite the jump in spending early in the year.  The GDP figures and the relatively weak economic data releases this week suggest bonds should be well bid for today and going further.

On a positive note,  for the sixth week in a row now, Austin mortgage rates have eased to all-time record lows, even during a week of pretty mixed housing data.  Rates sit at the lowest point since Freddie began tracking it in 1971.

Buying today has helped the market maintain its bullish signals that have formed on intraday charts.  However, one thing to note is that all have reached elevated readings that make additional upside less likely for the immediate time frame.  This sets the market up for a pullback after bullish conditions on weekly and monthly charts get their way today.  Now, this doesn’t suggest a major reversal is in play by any means, just a slight pause, possible into next week.  I think any stability below a 2.95yld would still put us in a good position to do better.

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.

Treasuries and mortgage backs hung in there, yet pared their gains to present levels of plus 4/32’s (10 year note) and plus 1/32^nd MBS.  Nothing huge to read into but just the same, the follow through buying in stocks is worth notice.  10 year notes will retain their bullish edge (day end trading) but are starting to lack a trend reading.  This typically will tell us that buyers of treasuries still have the advantage but will need a little giddy up go to stay at these levels.  Good time for Austin mortgage borrowers to put both hands on the wheel.

The tactical bias is still a bullish one as traders look to buy the dip into month end/quarter end extension needs.  ADP Jobs expectations hit the tape plus 13k for June, well below the consensus call of plus 60K.  ADP estimates that manufacturing gained 16K, goods producing jobs lost 17K, and services jobs rose 30K.  Once again, small business jobs growth produced the bulk of the services sector jobs.  Expectations for Friday’s Employment Report are still looking for a loss of 110K.  Not a pretty picture.  Chicago Purchasing Managers Index was also released, dipping slightly to 59.1.  The number was right on expectations.

For now, it looks like fast money is taking profits on the longer end of the curve (10’s through 30’s) as the note dips below 3.0%.  Real money buyers are in the mix, picking up most of what’s out there for sale.  With the contagion in Europe and domestic housing/employment woes in vogue, it’s hard to see the market doing much of anything.  The chart reveals much of the same.  Stalls have held above support as higher highs and higher lows are being produced.  Overall supportive but just the same, the market has come a long way in short period of time.  Some type of consolidation would not be a surprise at all.  Currently, mortgage backs are off 6/32’s.

Odds of a worsening Austin mortgage price change are starting to rise.  Be careful out there.

With the 10 year note now trading at 3.09%, a level not seen since last April, many are talking about our market being “bubble-ishous”.  The other contingent thinks bond prices are just “insane”.  With the 10 year yield at levels not seen since 2008 and 1962, one would think that a correct is imminent.  Quite possible but not a given.  Technically, our chart work makes a case for 2.92% to 2.78% on the 10 year note.  All depends on stocks and the economy.  Even the FOMC “downgraded” the economy to underperform.

Early buying today has started to show signs of a new bullish trend, endorsed by almost every oscillator.  The key to a new trend will be a close below 3.09% on the 10 year note.  This will activate a break of the major double top which has been in place for over a year.  “If” this happens, the next target will be 2.88%.  Not to throw cold water on the bulls but we think this market is a little long in the tooth, pricing in as much bad news as one could imagine.

Not to say we will not see lower Austin mortgage rates and better pricing but for that to come to fruition, we’ll need a major catalyst.  Something like a stock market rout or collapse of Greece.  In English, the smart money will bet against this, at least for a corrective trade that could take the 10 year note back to 3.25%.  Pricing was struck with MBS unchanged, now down 5/32’s. Trigger fingers are getting twitchy.

With Austin mortgage rates at or near historic lows, best bet is to take a little off the table before the market “potentially” picks your pocket. Careful out there.