Hard to tell what’s going on in the Treasury/MBS market as it seems to have taken on a volatile life of its own.  Given the recent range on the 10 year note (3.26% to 3.78%), most traders would assume that we would not go into a high profile number (Employment Report tomorrow) at one of the extremes.  Well, that’s the case as we are currently trading at 3.75%, near unchanged on the day.

Speaking of the Employment Report, tomorrow’s 7:30 am cst release is setting up to be a big market mover.  Rumors are all over from job losses of only 200K or less to revisions for the past 6 months totaling 1 million addition layoffs.  This one is as tough to handicap as I’ve seen in 10 years.  More on our cracker jack prognostication this afternoon.

Earlier today, Weekly Unemployment Claims fell 38K to 550K as the labor department received a larger than expected decline in seasonal adjustments.  Continuing Claims however were back on the rise, up 69K to 6.3 million.  While the net moving averages (Weekly Claims) are moderating and the Continuing Claims are off the 6.9 million print, we see employment a touch brighter but not out of the wood.  Continuing Claims are the best barometer and as they statistically look better, we see this as an exhaustion of benefits and recipients finding jobs, somewhat distorting the numbers.  On a net basis, the change is nothing to write home about and in our opinion, not economically bullish.

Across the pond, the Bank of England threw another 50 billion sterling at their Quantitative Easing Program, surprising currency markets worldwide.  The move strengthened our dollar and pinched commodities and stocks at the same time.  Currently, the Dow is down 30 something on the big board and our mortgage backed securities are off 2/32’s.  Technically, our charts and trading signals continue to focus on the bearish trend (bad for Austin mortgage pricing).  Sell signals have formed on Trend Intensity while slow stochastics and moving averages lean bearishly (daily time frame).  It makes me a little nervous sitting on range support (3.78%) going into Big Daddy tomorrow.  We would like to see the bulls step up and buy this market, making the chart a little more neutral going into the payroll print.  Fat chance.