Friday - November 1, 2013, 11:40am ET

Current Trend Direction: Sideways and on Support

Float/Lock bias:Cautiously FloatingCurrent Price of FNMA 4.0% Bond: $105.12, -16bp

"By the hair on my chinny-chin-chin"...that is what Mortgage Bonds are saying (if they could talk) as they cling for life on support at the 200-day Moving Average.

Prompting some selling in Bonds was comments by Philadelphia Fed President Charles Plosser who said that he and other Fed members are "growing worried about the consequences of how we unwind ourselves from all this stuff." No kidding. We're talking about kicking the can down the road on the fiscal side as government just delays tough decisions. But the Fed has kicked the can down a dead-end and it is going to be a very interesting time to see how this unwinding of easy money policy takes place.

QE has been very kind to Stocks this year - the S&P is up 23%, the Dow up nearly 19% while the Nasdaq is up nearly a whopping 30%. We don't see tapering until at least the end of the 1st quarter of 2014. With political uncertainty, weak economic conditions, no inflation and sluggish labor market - we just might see QE3 sail full steam all of 2014...especially with Janet Yellen at the helm.

This outlook will change with the incoming data. And next Friday's October Jobs Report will be a big factor in determining whether we see tapering early next year. Based on the ADP and some of the recent data, we are not looking for a good jobs report - which would play to our theory that QEUnlimited rolls on full bore for a bit longer.

Bonds need to break a bad streak today. There are seven consecutive Red Candles on the chart. If today's present Green Candle turns Red, the Bond will likely close beneath the 200-day MA. We are starting the day floating but very carefully...if the Bond turns lower here, you will need to consider locking everything.

Ideally, we would like to float all the way to next Friday's Jobs Report - but the market may not let us. If prices move beneath the 200-day - LOCK.

Have a great weekend!

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com