Another strange day in the mortgage world we live in.  Treasuries tested new low yields earlier today and then gave up the ghost, giving up over 10 bps on the note and nearly 15 bps on the 30 year bond.  Part of this is due to low volume, exaggerated trading.  When traders get the market moving in one direction and couple it with light volume, no one is on the other side to take the trade.  Makes for a painful day if you’re on the wrong side.

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.