After a positive open (bonds) on soft stocks, Pending Home Sales hit the tape and spoiled the party.  The Index rose 3.6%, much higher than expected.  On an annual basis, the index was up 6.7%, showing signs of a bottoming in housing.  Sales rose in every region of the country with the South leading the way, up 7.1%.  While analysts’ talk about stabilization and a bottoming process, we see this as more bottom fishing on cheap prices due to foreclosure inventory.  Earlier today, Consumer Income hit the skids, falling 1.3% while Spending rose .4%.  The Income component was the largest monthly decline since January 2005.  Pure and simple, it  reflects declining wage and salary disbursements.

The week ahead is chocked full of data, culminating with Friday’s Employment Report for July.  Early call here is  for a loss of 300K jobs and the unemployment rate to reach 9.6%.  Our analysis will be out Thursday afternoon.  Tomorrow the ADP Employment Report will make its best guess on Friday’s numbers along with Factory Orders and ISM Non-manufacturing data.  Thursday’s Unemployment Claims will take a back seat to Friday’s Big Daddy release.  The Treasury will also release details of the Quarterly Refunding package that will come to market next week.  More supply will hit the market in the form of 3 year notes, 10 year notes, and 30 year bonds.

From our technical view, the chart looks more like “crack the whip” than any type of symmetrical trading.  Last Friday caught a bid from month end buying (portfolio extension needs), Monday gave it all back as stocks traded and closed above 1000 on the S & P chart, and today’s rally has been derailed by Pending Home Sales.  Tough to trust this market.  Currently, the 10 year note is off 13/32’s (yield 3.69%), mortgage backs off 7/32’s, and stocks up a nickel.