Thursday - January 16, 2014, 10:35am ET

Current Trend Direction: Sideways beneath resistance

Float/Lock Bias: Locking. Current Price of FNMA 4.0% Bond: $103.84, +22bp

After hitting another record close yesterday, stocks are lower this morning which is boosting Bond prices in the early going. This morning's tame inflation data from the Consumer Price Index also helped to support prices.

The Labor Department reported that the Consumer Price Index (CPI) rose by 0.3% in December, its biggest gain since June led higher by energy and shelter costs. When stripping out volatile food and energy, the so-called Core CPI came in lower than expectations at 0.1% versus 0.2%. Year-over-year the headline CPI fell to 1.0% from 1.7%, Core at 1.7%, matching the year-over-year in November. Not much inflation pressure at the consumer level, which will be closely watched by the Fed in its taper decision.

In labor news, Weekly Initial Jobless Claims fell by 2K to 326K and below the 333K expected, a six week low. The 4-week moving average, which irons out seasonal abnormalities, fell by 13,500 to 335,000, the lowest level in five weeks. Later this morning, the Philly Fed and the NAHB Housing Market Index will be released at 10:00am, which could provide some volatility.

In corporate earnings news, Goldman Sachs reports that Q4 net-income dropped 19%, but earnings per share was $4.60 compared to the $4.21 expected, while Citigroup's quarterly profits rose 21%.

RealtyTrac reported that foreclosure filings plunged by 26% from 2012 to 2013, with 1.4 million recorded last year, which was the lowest total since 2007 as the housing sector continues to rebound. Foreclosure filings peaked in 2010 and have fallen 53% since that time.Technically, the Bond is trading below resistance at both the 50 and 100-day Moving Averages and near the upper end of the recent trading range. Unless prices can bust above this thick layer of resistance clients should be advised to lock with Bonds right at a ceiling.

Joe Shamie NMLS # 241432

First Choice Loan Services NMLS # 210764

First Choice Bank NMLS# 177877

866-970-3400 x-5135

jshamie@fcbmtg.com