Wednesday, January 22, 2014 - Article by: Joe Shamie - First Choice Loan Services -
Wednesday - January 22, 2014, 12:55pm ET
Current Trend Direction: Sideways near resistance
Float/Lock Bias: Locking with prices fighting resistance and at top of trading rangeCurrent Price of FNMA 4.0% Bond: $103.81, -22bp
Mortgage Bonds continue their sideways to lower pattern today in the absence of any major economic data or events. Even a flat to lower Stock market has been unable to push Bond prices into positive territory.
There were no major economic reports released today, but the Mortgage Bankers Association reported that its Market Composite Index, a measure of loan application volume, rose by 4.7% in the latest week. The refinance index rose by 10%, but the purchase index fell by 4%. The activity rose as Freddie Mac reported last week that the 30-year fixed rate was at the lowest point since November 13.
While the economic news of late is pretty good, if you must worry about the economy, chew on this: the non-manufacturing Purchasing Managers Index of new orders is shrinking for the first time since July 2009. Moreover, the backlog of orders has now been contracting for two straight months, supplier deliveries are barely growing, and new export orders are growing anemically. That said, the overall index is firmly positive.
Technically, Mortgage Bonds are trading sideways to lower with no clear catalyst emerging to push prices higher. And with tough overhead resistance from the Falling Trendline and the 100-day Moving Average, we will continue to recommend Locking here in the short term, which is measured in a few day to a few weeks.
We are seeing the potential for a double-top reversal where today's high matches up with the highs of last week. This is potentially negative for Bonds. However, if the Bond can break above this resistance, it would not only negate this potential negative pattern, it would actually be a little bullish or good news for Bonds. You should be locking to avoid the "if", "ands" or "buts." If prices move higher, it will be a time to be more optimistic."
Joe Shamie NMLS # 241432
First Choice Loan Services NMLS # 210764
First Choice Bank NMLS# 177877
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