Mortgage Market Update

Many of you are probably wondering why this week’s update is so late and please accept my apologies for the fact that it is.  Today was my checkride to allow me to keep flying and as such, I tend to “disconnect” emotions and extraneous thoughts, and I forgot to upload this morning’s update.  The funny thing is that mortgage bonds have been acting “disconnected” as well.

What an interesting week we had last week, with technicals beating out data even, which is not normal.  In my flying career, I come to Dallas every 9 months to practice abnormal procedures, like losing an engine as you rotate on takeoff, windshear, and other fun stuff we hope we never see in real life.  Taking a look at the last week, as I thought possible last week, we had a great opportunity to float as mortgage bonds moved higher within their trading range, but the sharks I warned you about finally did show up and data couldn’t stop them.

As the data started flowing, right as the week started as well, we saw mortgage backed securities begin to rally, and they really took off on Tuesday, even with the absence of data.  Throughout the week, the data pointed to a struggling economy, bringing recessionary fears to the forefront, and even ended the week with a dismal jobs report.  Yet, mortgage bonds did exactly as the charts predicted, even with the dismal data and that was the weird part, since favorable data is what usually gets mortgage bonds to break through resistance or support layers and the bad jobs data should have sent them through the roof.

So, we are in another abnormal time, where we see chart patterns outweighing resistance, and that has trapped mortgage bonds in their sideways trading pattern and is sending mortgage rates higher, as we even saw today.  Mortgage rates last week did manage a net drop for the week, but the week ended very poorly and painted a very ugly picture for at least the near future.  Remember those sharks I warned you about last week?

Since this report ended up being rewritten this evening due to my hectic day (I even caught a flight back home), we see that the week already started out continuing where Friday left off, with mortgage bond pricing dropping, though only slightly.  There is not much in the way of data this week, so technical indications are leading the way, that is unless we get some major news that changes things, which is not likely.  Retail Sales is the “big one” this week.  Here is the scheduled data releases for the week…

• Monday:  No data
• Tuesday:  Take a moment to thank those whom have served our country, especially those whom have lost their lives.  Don’t forget those serving right now as well.
• Wednesday:  No data
• Thursday:  Initial Jobless Claims (8:30), Balance of Trade (8:30)
• Friday:  Retail sales (8:30), Consumer Sentiment (10:00)

This week may be a very volatile one as today ended early and the markets are closed tomorrow in observance of Veteran’s Day.  Volatility is usually increased on shortened trading days and shortened trading weeks.

Taking a look at the charts, we see another lower peak in pricing and that means the trading range remains intact, with decreasing tops.  We can expect mortgage bonds to slide back down and test their support at the bottom of the trading range, and we hope that support holds again.  This week, plan on mortgage rates returning to their recent highs, about where we started last week, after which we may see another period available for floating if the range holds.

PS – Please accept my apologies for the tardiness of this week’s update and don’t forget my daily updates over at Florida Mortgage Daily, which will resume with this evening’s report as well.