Great day to lock!

Mortgage bonds bounced higher this morning, fueled by a strong technical picture and a falling stock market.  The S&P 500 is now flirting with the 100 day moving average.  This is a level that has not been broken in years.  A decisive break below this critical point will signal a higher probability of a 10-15% correction.  Speaking of a stock market correction, it has now been well over 1100 days since the stock market has experienced a noteworthy correction.  With Quantitative Easing III coming to an end later this month, the timing is right for stocks to face increased weakness.  The significant amount of volatility we have had lately serves as evidence that investors are becoming nervous.  Watch closely, as a continued drop in stocks will help support lower mortgage rates.

ADP released their estimate of job growth for the month of September.  They reported that 213,000 new jobs were created, which exceeded expectations of 200,000.  The strong report, combines with the lower Unemployment Jobless Claims in the sample week that is used to compute the figures, increases the likelihood of another report north of 200,000 on Friday when the Bureau of Labor Statistics releases their report.  If the report happens to be weaker than expectations, it could be the catalyst to push the stock market lower and drive mortgage rates lower as well.  However, if the report is stronger than expectations, the opposite could happen.

Mortgage bonds have moved higher at an unsustainable rate.  Bonds are higher than the upward channel they have been riding, and are now at risk of a pull back.  If Friday’s BLS Job’s Report is stronger than expected, it could provide a bounce higher for the stock market.  With the risks of floating becoming increasingly higher, we feel it is now a good time to lock.  However, if you believe the report will be weaker than expectations and decide to float, watch closely and be ready to pull the lock trigger if the report is strong.