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Friday, February 29, 2008

Treasuries

Treasuries rose, pushing two-year yields to the lowest level since April 2004, as mounting losses in credit markets and the slowing U.S. economy drove investors to the safety of government debt. More than $181 billion in losses linked to subprime mortgage loans have made banks around the world less willing to lend to companies and individuals. The losses, triggered by the worst housing recession in a quarter-century, have prompted the Fed to cut rates to 3 percent from 5.25 percent since September.

Fed Chairman Ben S. Bernanke told the Senate Banking Committee yesterday it's ``fair'' to say the Fed has a tougher time responding to the current slowdown compared with the recession of 2001. He said some small banks exposed to real estate may fail, fueling bets policy makers will increase the pace of interest-rate cuts.

SP 500 daily Feb 29


Thursday, February 28, 2008

Feb 28 support and resistance S&P 500


Today we are consolidating

66 -69 range with a 14.5 point trading range.

Market is preparing for the news tomorrow.

Trade what you see.

Treasuries rose, with three-month bill rates dropping to the lowest since 2004, as reports showed the economy's fourth-quarter growth was less than forecast and first-time claims for jobless benefits increased last week.

U.S. government debt also advanced as stocks declined and phone company Sprint Nextel Corp. and mortgage financier Freddie Mac said they lost almost $32 billion last quarter. Federal Reserve Chairman Ben S. Bernanke told a Senate committee today that it's ``fair'' to say the bank has a tougher time responding to the current slowdown compared with the recession of 2001. Initial jobless claims increased by 19,000 to 373,000 in the week ended Feb. 23, from a revised 354,000 a week earlier that was higher than previously reported.


Traders increased bets that the central bank will reduce the target rate for overnight lending between banks by more than a half-percentage point next month. Bernanke signaled he's ready to lower interest rates again in testimony to a Senate panel today. Ten-year note yields may fall to 3.55 percent by the end of June with the most recent forecasts given the heaviest weighting. Two-year yields may rise to 2.06 percent, from 1.86 percent today.


Freddie Mac, the second-largest mortgage-finance company, posted a record $2.45 billion fourth- quarter loss as rising defaults sent credit costs soaring. Freddie Mac, which buys and guarantees home loans, had predicted the results would be similar to the third-quarter's $2 billion loss.

Tuesday, February 26, 2008

SP 500 daily Feb25 patterns


Here are a few chart patterns on the 5 minute. You can correlate the breakthroughs and the volume break outs.


Trade what you see.

Yesterday it was reported that Existing Home Sales slipped 0.4% in January, and that the inventory of homes for sale edged higher, reflecting a growing imbalance between housing supply and demand. Good for buyers, not for sellers: sales of existing homes are now down 32% from the peak in autumn 2005 (New Home sales are -55% from the peak).

This morning the Producer Price Index jumped 1.0% in January on rising energy costs and posted the biggest 12-month gain in more than 26 years. Core PPI, which strips out volatile energy and food costs, was +0.4 percent, the sharpest increase since February. They were expected +.4% and +.2% respectively, so worries about inflation seem to be real - producer prices were up 7.4 percent from January of last year, the steepest climb since October 1981! Later this morning we'll see Consumer Confidence, Fed Governor Kohn speaking in New York , and the markets preparing for a $24 billion 2-yr auction tomorrow and a $14 billion 5-yr auction Thursday.

Mortgage prices were roughly unchanged before these numbers, and are currently...about the same! This is surprising, although there is some feeling that a) the market is "over-done" on the side of higher rates, and b) the continued housing weakness is bound to have more impact on the economy as time goes on (not good!). Yesterday the markets got some good news when S&P did not downgrade bond insurers MBIA or Ambac. If they had been downgraded, they would have had trouble guaranteeing debt and strip the AAA label from $1.2 trillion of insured municipal and asset-backed debt.

90 % increase in foreclosures

Repossessions rose 90 percent to 45,327 last month from the same period a year ago, RealtyTrac Inc. said today in a statement. Total foreclosure filings, which include default and auction notices as well as bank seizures, increased 57 percent. What we are seeing is the failure of home owners to make payments on their adjustable rate loans. These loans are resetting at higher rates.

The talking heads are saying this is the bottom, I see another 460 billion dollars of Adjustable loans ready to reset this year and wonder how long this next group will hold on. This is also not considering that most of these homes were purchased at the top of the market and are upside down.

Existing home sales have just fallen to their lowest level in a decade. Standard and Poor's announced that the last quarter of 2007 housing fell 8.9%. The largest single drop in 20 years.

Friday, February 22, 2008

January Import prices soar 13.7%

Inflation, that aint inflation thats just a price adjustment. Yes, we are getting a taste of the value of the dollar. For the past few years the US public has enjoyed our imports from China, the inexpensive and an unexhaustable supply of cheap stuff that we can charge to our credit cards.

Well the flood of US dollars to cover this market has led us to our first rounds of "Price Adjustments." Economists normally call this inflation, and for the most part the backpeddling of the Fed announcing that it could be a little worse that we thought, is probably one of the biggest understatements of the Year.

Looking at Import prices alone, we can see that the January surge of 13.7% is the largest one time price increase since the government started keeping track in 1972.

Lending rates.


US Treasuries are steady this morning, with the 10-yr hovering in the high 3.70's. There is no scheduled economic news, aside from stock markets in Europe and Asia falling overnight. Mortgages, on the other hand, are slightly worse in price after a week of volatility. Prices were helped yesterday by a weak Philly Fed Index result, but lagged Treasury rates. Investor appetite for risk, which includes mortgages, remains low.
Fed funds futures on the Chicago Board of Trade indicate a 94 percent chance policy makers will reduce the target rate for overnight lending between banks to 2.5 percent at its March 18 meeting, compared with odds of 66 percent a week ago. The chance of rates being cut to 2.25 percent are 6 percent, down from 34 percent last week.
Fed policy makers indicated borrowing costs need to be kept low ``for a time". Some foresaw raising interest rates, possibly at a ``rapid'' pace, once the economy recovers. The central bank cut borrowing costs by 125 basis points to 3 percent last month, the fastest easing in almost two decades.

SP 500 going to have a little trouble with Bond insurers

Looking for the Bond insurers to lead the DJIA lower today. S&P will be feeling it also.

Wednesday, February 20, 2008

Ascending Triangle


Ascending Triangle Look for the approach to the 44.75 price, if there is a lot of volume push then break to new high.

Tuesday, February 19, 2008

The new FHA programs.

Currently the FHA program has no declining value adjustments at the government level, has low down payment and loan to values as high as 97%, cash out refinances allowed to 85%, rate and tern refinances to 97%, total down payment can be a gift, no credit score requirements, no income limits or sales price restrictions, FHA loans are assumable, seller concessions may be as high as 6%, no cash reserves required, non-occupying borrowers are allowed with blended ratios (SFR only), non taxable income (including child support) may be grossed up, and bankruptcies allowed after 2 years. We'll see if investors continue allowing all of these with $729k loan amounts, or if they add "overlays" to restrict underwriting.

This week's economic news.

The yield on the 10-yr is up to 3.86%, and mortgage prices are worse by .250-.375. The only news due out today is the February NAHB housing market index, expected to be unchanged at 19. It measures the general state of the single family home market, and a reading above 50 signals a "good" outlook while a reading below 50 signals a "poor" outlook - it has been below 50 for almost two years. Tomorrow we have the release of the FOMC minutes from the Jan 29/30 meeting, along with the January Consumer Price Index report and Housing Starts. The CPI is expected +0.3% in the overall index and +0.2% in the more important core data. Lastly on Thursday we'll see the Leading Economic Indicators (LEI) report for January. It is an attempt to predict economic activity over the next 3-6 months, and is expected to show a 0.1% decline, meaning that economic activity may slow slightly in the near future.

Thursday, February 14, 2008

Ben testifies, Market weakens, bonds weaken

Why have rates been heading higher the past few days? Is the economy really doing better?
After 9 days on a run down, the market rests, gains a little strength and then heads lower.

Overnight in Tokyo, US Treasury prices were lower, and rates higher, after a stronger-than-expected GDP number from Japan , which caused Asian stocks to rally. This followed a day in the US where the curve continued to steepen, which has continued this morning.

In the US yesterday, we had a strong Retail Sales number, followed by this morning's Trade Balance numbers ($58.8 billion deficit, slightly narrower than expected) and Jobless Claims (-9k from 357k to 348k, and continuing claims steady, but at their highest level in 2 ½ years). All eyes will be on Fed President Bernanke when he testifies before the Senate Committee later today. Oil prices are on the rise, back into the low $90/barrel range. Here comes $100. The 10-yr has moved about 3.75%, and mortgage prices are worse by .375.

Also UBS mentioned they have another 27Billion in Subprime to look at writing off......

Tuesday, February 12, 2008

SP 500 At the close feb 12


And using the same lines as before the close. You can also see the descending Triangle in the middle and on the third approach the volume push through that takes the market to close the gap and rally 10 points.


What a day.

Good news, bad news SP 500




The markets had a good start to the day but finished with a drop that left the market 9.75 above open.








is an interesting article on 6 lenders to get together for a 30 day reprieve for those that qualify.






Obama also gave some interesting news for those of us who pay capital gains tax. He will be raising it from 15% to 28%......HMMM.




Market is still posing itself for more of a rally. Could be short lived. We will see.





Tomorrow President Bush is likely to sign into law the recently passed economic stimulus bill. It raises the limit on the size of mortgage that Fannie Mae and Freddie Mac may purchase and that the Federal Housing Administration (FHA) may insure. In both cases, the increases are temporary and apply only to loans originated by the end of 2008. If signed, Fannie and Freddie may purchase loans up to 125% of the median home price in an area, up to a national limit of $729,750.



FHA limits, and I assume VA, would see the same increase, and the floor on FHA limits would be raised so that larger FHA-insured loans would become available in low-cost areas.

Sunday, February 10, 2008

23 support to test, Yesterdays level SP 500


Let's watch it test the 23. Probably after hours, if alot of momentum then maybe to 19.

We shall see.

It also seems this market is hinging on bonds and their volitility.

Saturday, February 9, 2008

Follow up on 5 min support and resistance SP 500


One more chart two days later of the same lines.


42.50, 39, 29, 22.50


Great trades
Head and shoulders, Inverse Head and Shoulders
Volume break outs and direction

Support and Resistance in the SP 500


I have used these lines the past few days and look forward to trading them next week too. Just a note on Spill over...


I expect to see the British Pound then the Euro Show weakness against the dollar. The European Central Bank is jumping in adding liquidity to their markets because of the subprime debacle. I expect to see some consolidation and then a fall.


We shall see.


Wednesday, February 6, 2008

The daily SP 500 Jan 28 After hours


This is how it looks. We gapped down quite a bit here. Open will be tumultuous.
Traders see a 30 percent likelihood that Fed policy makers will reduce their target for overnight loans between banks by three-quarters of a percentage point to 2.25 percent at or before their next scheduled meeting on March 18, futures on the Chicago Board of Trade show. That probability was 14 percent yesterday. The rest of the bets are for a half-point cut.
Treasuries of all maturities have returned 3 percent since Dec. 31, the best start to a year since returning 4.1 percent in 1988, according to indexes compiled by Merrill Lynch & Co. The worst housing slump in a quarter century, combined with $146 billion in asset writedowns and credit losses at banks and securities firms worldwide, have driven investors to the relative safety of government debt. In the final three months of 2007, the average rate on a 30-year fixed was 6.29 percent. During the third quarter, the average rate was 6.6 percent. For many people who bought houses in 2006 and 2007, this month has been a chance to refinance.

SP 500 daily Feb 6 5 min after hours


Here is the after hours chart for the S&P 500
5 min bars, after the close


Looks like the news is not good no matter how much stimulus you put behind it.


Watch for the fall.

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