FINANCIAL MARKET UPDATE #3/ Week of August 10, 2009

Good Morning Everyone and Happy Tuesday! As we have been predicting for too long now, the stock market appears to finally be pulling back a bit. The thing to watch is the resistance lines. Notice yesterday we were down about 70 points on the Dow, we hit a resistance and bounced back up to cut the losses in half. This morning we were down on the Dow a little over 100 points and seemed to have hit a resistance line again. I don’t tend to be a technical trader, but we have seen this pattern over the last couple weeks. Watch for a breakthrough on a particular resistance line and you’ll see others begin to sell on fear. When that happens, we’ll see a sizeable drop in the stock markets which should last a few days.

Fortunately, as we have witnessed for that last couple days, any slight negative move on equities means a benefit in rates, and we are witnessing it again today. Our rates are better by about .500 in rebate from yesterday morning on our conforming 30 year fixed. A nice move in the right direction, but remember last Friday, about 11 days ago. Our 4.875% on Friday afternoon the 31st was a cost of .343 – today it’s a cost of 1.325. SO, we’re making up some ground, but still have a ways to go to get back to where we were just 7 trading days ago.

There are some minor economic news releases this morning. Wholesale inventories dropped in June by 1.7%, about double what the experts were looking for at .9%. This is good news for the economy as companies are continuing to get leaner. This index has dropped consistently for the last 10 months. Productivity increased in the 2nd quarter of ’09 and unit labor costs fell more than anticipated, both signs of a recovering economy. This news is not having much of an impact on trading today, though. The big event that could affect our world is the auction of $37 Billion worth of 3 year T-bills. Demand has been good in recent auctions, and if that persists again today (and 2 more auctions this week) then we could see increased interest in credit instruments.

I will be in the office all day today, so please Call me here at the office or email me if I can help you in any way. Have a terrific Tuesday!