I find myself in a strange place writing this week’s post as I am in a doctor’s office while my son’s dislocated broken finger gets put back in place. What a trooper as he didn’t even cry when they did it. And speaking of strange places, we are currently in one in the mortgage market place as the trend could go either way from here and the next several trading days will determine the exact future.
Last week saw the corrective move, or retracement finally take place and the good news is it retraced the full move higher, not just the last one. That means we could resume an uptrend from here, but things are not always that simple as some key support layers had to be broken to make the move happen and that actually could have broken the uptrend as well. This is a point where only time will be the deciding factor, but don’t lose hope yet as we are already seeing a move higher today.
OK, what happened to finally let reality hit the markets? We received the standard mixed signals of the economic recovery as the week got started, but the Chicago PMI was better than expected and got the ball rolling so to speak. That coupled with the news of salvation for the Dubai debt debacle which set stocks higher and thus mortgage backed securities lower. The ISM Manufacturing survey was favorable, but not enough to stop the fall long term, and the ADP Employment Report pulled the next rug out. Thursdays Jobless Claims and Friday’s Jobs Jamboree finalized the move lower, which ironically will now require a corrective move higher at a minimum.
So what lies ahead? As MBS prices try to resume their prior uptrend, they will face some tough obstacles to prevent the complete trend reversal. Here is what lies on the current agenda for this week, which will be relatively calm until Friday…
- Monday: 3-month T-Bill Auction (11:30), 6-month T-Bill Auction (11:30), Ben Bernanke Speaks (12:00), Consumer Credit (3:00)
- Tuesday: 4-week T-Bill Auction (11:30), 3-year T-Note Auction (1:00)
- Wednesday: MBA Purchase Applications (7:00), Wholesale Trade (10:00), Crude Inventories (10:30), 10-year T-Note Auction (1:00)
- Thursday: Jobless Claims (8:30), International Trade (8:30), Elizabeth Duke Speaks (12:45), 30-year T-Bond Auction (1:00), Money Supply (4:30)
- Friday: Retail Sales (8:30), Import and Export Prices (8:30), Consumer Sentiment (9:55)
As you can see, the beginning of the week, along with the majority of the rest of it, will be all about the Treasury auctions. If they continue to go well, we will likely see the resumption of the uptrend, but if any go bad, expect this next move higher to be a corrective one, followed by a new downtrend.
The bottom line is that you should be able to float for at least a day or two and improve your client’s mortgage rates right now, but be careful as the week unfolds and be ready for a change for the future.
Robert I will definitely be watching to see how things play out. Your analysis last week was pretty spot on.
Hope your son is doing better.
Roy Paeth
Chicago First Time Home Buyer
Always interesting to read your insights on the mortgage market. I too hope your son gets well soon, hopefully in time to open his presents!
Eric Steinbach – Kelowna Real Estate
A very nice article and a very important update on Mortgage update
Thank you all for the kind words on my son. He thanks you as well. They ended up using a cast to ensure his finger stays in place, but he should be healed in three weeks, just after the new year begins and he is doing fine.
It is also good to hear the feedback as I have said in the past, so please keep commenting and I will try to visit the site more often, time permitting, and hopefully provide quicker responses, especially to specific questions.
Nice post here. It does make senses, appreciate for sharing.