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”)!

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.

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.

With both retail and fast money accounts quiet, pricing reflects much of the same.  10 year notes are up 1/32^nd, current coupon mortgage backs up 1/32^nd, and stocks down 20 points on the big board.  The week ahead will feature Import Prices tomorrow, Weekly Unemployment Claims and inflation data (PPI) on Thursday, and CPI (inflation at the consumer level), Retail Sales, Empire State Manufacturing, and Michigan Sentiment Survey on Friday.

Currently, the best bet for Austin mortgage borrowers: don’t take historic low Austin mortgage rates for granted.

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!

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.

Nothing huge here as the Dow is plus 107, 10 year note down 20/32’s (yield 3.29%), and mortgage backs off 7/32’s.  Potentially, this is big news but then again it is China.  Let’s just say traders have “trust” issues.  The week ahead will fire up tomorrow with Existing Home Sales, FHFA House Price Index, and day one of the FOMC meeting.  Wednesday, the FOMC concludes with any change in Fed Funds rate/monetary policy due at 1:15 pm cst.

New Home Sales will also be out in the morning.  Thursday’s data will release Durable Goods, Weekly Unemployment Claims, and the Kansas City Fed Survey.  We’ll end the week with final GDP Q1 and the Michigan Sentiment Survey.  This week’s data will be important as the focus will be on Housing, Unemployment, and the Fed.  All three seem to be the biggest drag on the economy.

In the “for what it’s worth” department, top analyst Meredith Whitney has a bearish call on equities (stocks) and expects the U.S. economy to have a rough second half.  If true, expect Austin mortgage rates to stay low into 2011. Technically, I completed my chart work on the cocktail napkin Friday night.  Bears have the advantage but only slightly, leading us to believe we’re trapped in a triangle pattern range trade.  Let’s call the market neutral and have great week.