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”)!

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.

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.

Weekly Unemployment Claims were also on the docket, rising 13K to 462K.  Just when we though the employment picture looked to be improving, reality is telling us that a sideways move with little improvement is probably the correct call.  Continuing Claims were the bright spot, falling 112K to the lowest level since November 2008.  Yesterday’s price action was somewhat of a surprise as late in the day, notes, bonds, and mortgage backs made a comeback.  Not sure why, given an as expected 10 year note auction and positive stock market.

Seems as though the reason has to do with QE2, the 600 pound quantitative easing gorilla that is still in the picture.  Tells us two things; one is that the market will (should) be supported on pullbacks until details are released.  Two, the market is trading only on this, so to speak its a one trick pony.  Austin mortgage borrowers need to be careful.

Currently, the 10 year note is off 5/32’s, mortgage backs are down 3/32’s, and stocks are off 20 something on the Dow.  Yesterday, I talked about the Elliott Wave chart and the high probability of a new A wave beginning.  Notice how the uptrend has been broken yet needs confirmation.  Now look at the bearish cross on the RSI oscillator.  These are good early signals of a market that is in transition, moving from bullish to neutral/consolidative or possible bearish given a shift in economic fundamentals.  Similar patterns are showing up on the candlestick chart.

Austin mortgage borrowers: best to take a conservative approach given the amount of volatility we expect.

Today, the good personality appears, as the Fed Chief stuck to yesterday’s script and Big Caps like Caterpillar and 3M wacked it out of the park (better bottom line earnings and top line revenue stronger than expected).  Results, Dow up over 200 points as if everything in the economy is all right.  Euro zone manufacturing numbers were better than expected, adding a little icing on the cake.  The point I’m trying to make here is that volatility is at all time highs.  This is a product of an economy that is slowly coming out of a recession, showing bright spots from time to time while evil in the form of housing and employment woes let their personality loose just the same.  Expect this type of market trashing until a clear direction can be found.  One that points to a double dip or one that points to a more sustained recovery.  We believe the latter has the highest percentage outcome.

Reasons being are that the Euro zone appears to be stabilizing (tomorrow’s stress test results will be key), large blue chip companies are doing pretty well despite the gloom and doom, and interest rates, both by the Fed and the market (mortgage backs) will be low until the aforementioned bias is intact and investor sentiment turns bullish.  Just the same, do not take anything for granted.  Earlier today, Weekly Unemployment Claims jumped 37K to 464K while Continuing Claims fell 223K.  Distortions here are huge, maybe Consensus worker layoffs and long term claimants felling off the table.  Time will tell.  June Existing Home Sales took a dip as well, down 5.1%, the second consecutive month of declines.  The number was actually better than economists expected.  Wow, great news, their only down 5.1%.  Let’s call the Claims and Existing Sales today’s evil twins.

All of the above has pinched the 10 year note and mortgage pricing but to no great degree.  10 year down 10/32’s, MBS off 4/32’s.  The selling has not hurt the chart, just neutralized conditions a bit.  We see neither bull nor bear in control or as we like to call it, a Goldilocks market (just right).  With the market being so psycho and at historic lows in Austin mortgage rates, best to be careful.  You never know if tomorrow will be Dr Jekyll or Mr Hyde.

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.

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.

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.

Take for example this morning’s release of Weekly Unemployment Claims which rose 25K. Most thought the jobs situation was stabilizing. China seemed as though it’s growth would never slow. Now their slowdown is very real and the Shanghai Index chart (Chinese Stocks) has turned bearish. Greek’s have once again taken to the streets, looking for another bank to burn. Seems as though they are not in love with the austerity plan. When will Europe and our country for that matter figure out that when more people are riding in the wagon than pulling it, we have a problem. Off the soap box, on to the news.

The Weekly Claims number was a shocker. Analysts had expected a drop to 440K, not the 471K print. Continuing Claims dipped however, but not to the levels we were looking for. Not so good for the economy but good for Austin mortgage rates. Stocks are now in 10% correction mode from the highs. Another 5% is certainly possible. Leading Economic Indicators for April were also released, down .1%. The index fell for the first time in a year, adding insult to injury as far as stocks are concerned.

Last but not least, the Philly Fed Manufacturing Index rose 1.2% to 21.4. Looks like things are improving in the city of brotherly love. With Austin mortgage rates/pricing at the best levels of the year and the 10 year note hitting 2010 low yields, the time is right for borrowers to lock in their Austin mortgage rates.

We feel the market has priced in a ton of bad news. Not that it can’t get worse because we all know that’s possible. Just the same, it will take more and more negative news to drive the trade to lower yields. Given all of our oscillator work, we see a very overbought market. One that’s ripe for a correction. At the same time, until investors feel certain that the world will not come to an end, yields will not rise much. Perfect time for Austin borrowers to use the exclusive float down program offered by Max Leaman at PrimeLending Austin. Call Max at (512) 293-1239.

In this current enviornment, markets are more complex than ever and the flow of money with it’s associated risk can be powerful and detrimental.  The trend is changing and even though we don’t like it, a “new normal” for Austin mortgage rates is in the works.

The large channel dating back to last year, which gave us a series of lower highs and lower lows in yield has now been breached.  Phase two was the triangle formation that was trapped between 3.29% and 3.81%, winding itself tighter and tighter headed for a breakout.  That breakout happened yesterday and if you remember our comments a couple of weeks ago, our bias carried a high probability of that breakout leading to higher yields.  Wished we were wrong.

Damage done, it’s time to move on and get back to business.  Earlier today, Weekly Unemployment Claims fell 14K to 422K.  Continuing Claims also fell.  Both are not indicative of a trend but a better reflection of improving weather across the country and government consensus hiring.  Bill Gross, often refered to as the “bond god”, is talking about how he’s bearish on bonds and feels that stocks are a better buy.  He also commented that he expects to see the 1 year TBill rate at 1.25% to 1.50% within a year.  Today’s rate is .41%.

Currently, the 10 year note is off 14/32’s (yield 3.87%), mortgage backs are off 16/32’s, and stocks are on fire, up 100 points on the big board.   With the upward trend gaining momentum, the 10 year note is on a clear path towards 4.0% plus.  Best case on any rebound/reflex rally is back to 3.75%/3.77%.

We all know why the trend is higher but here’s some of the factors that could stop the selling and improve Austin mortgage pricing:

• One would be a good 7 year note auction today (12:00 cst).
• Two is month-end buying by hedge funds and money managers to extend duration.
• Three being weaker than expected Employment Report next week.  The market is looking for a gain of 200K.

Markets like this are very dangerous.  They can travel to higher yields beyond where you think they can.  They can stay over sold for long periods of time.  The bottom will not be put in until the last person sells.  On the bright side, markets do not go down forever, it just feels like it.  Hang in there.