Daily Commentary by Larry Baer: Trading activity is thin and sporadic in the
mortgage market this morning.
There is nothing of consequence on the
economic calendar until the release of the minutes from the Federal Open Market
Committee's July 31st - August 1st meeting hits the news
wires at 2:00 p.m. ET next Wednesday.
Even then the document is likely to do nothing more than reinforce the
broadly held belief the Fed is prepared to launch another round of fiscal
stimulus in the form of "QE3" should economic conditions deteriorate
further. So far U.S.
economic growth has been weak - but it has yet to show any sign of tipping over
into another full blown recession.
Until/unless the economic picture weakens further the Fed is almost sure
to keep their powder dry and remain on the sidelines - a condition supportive
of steady but not necessarily lower mortgage interest rates.
I think it is worth noting all it will really
take to nudge mortgage rates lower is another bad headline out of Europe
and/or a sell off in the stock markets here at home. For what it is worth my technical models are
suggesting the stock markets are very vulnerable to a sell-off as early as next
week. If my assessment proves accurate,
the top of the Dow's 11 week rally from the early June lows will be achieved in
a range between 13,245 and 13,400. The
ensuing sell-off in the stock markets, should it actually develop, will likely
prove supportive for the prospects of fractionally lower mortgage interest
rates in the near-term. Don't
jump-the-gun here -- in my judgment it is imperative the Fannie Mae 3.0%
30-year mortgage-backed security close above 102.375 before you choose to
initiate an aggressive "floating" loan position - even if the Dow
happens to be selling-off hard.
Be patient - be disciplined - and play it by
the numbers outlined above.
THE
MARKET IS ALWAYS RIGHT! . YOU AND I ARE SOME OF THE TIME
