Posting Times

Posts will be between 8:30 PM to 10:00 PM PST
Mikey's Short Term Trading Rules

1) Make up a list of stocks, commodities or ETF's to trade. This list should be names that have good earnings and high relative strength.
2) Monitor this list and throw out the weaker names
3) Buy only stocks or ETF's that are intermediate and daily up (green) and the market is Daily and intermediate term up (green)
4) Buy pullbacks on these stocks to the 20 and 50 day averages
Usually you get 4 to 6 20 day pullback buys and 2 or 3 50 day pullback buys in an intermediate term trend
5) More agressive traders can buy the 7 day average in the first 3 to 8 weeks of the uptrend.
6) Buy pullbacks not runups. A buy should not be easy or exciting but difficult and somewhat scary. DO NOT CHASE
7) Place stop at 5% below the buy price. Do not remove
8) Sell 3 to 5 days after the stock price takes out its most recent 2 week high with at least 15% gains
9) Uptrends that are 12 weeks or more may be ripe for a correction. The first 2 pullbacks to the 50 day are usually safe.
Intermediate term uptrends and downtrends generally last from 8 to 16 weeks with 12 weeks being the norm.
10) Shorting is a viable strategy in downtrends for experienced traders only. In general, reverse the above rules
11) Tweet Mikey @themarketshadow with questions or ideas

Friday, June 7, 2013

Mortgage rates to hit banks on the bottom line.

Have you called your mortgage broker in a while? If you haven't, you should. And you'll probably get her on the first ring. Being a mortgage broker has suddenly become a lot lonelier.
The number of people looking to refinance their home loan has plummeted recently. According to the Mortgage Bankers Association, the number of borrowers filing refinance applications fell 15% last week. That was the third week in a row that the MBA's refinance activity index has dropped, which is the first time that has happened all year.
The reason is obvious. Interest rates are rising. That makes it less attractive to refinance your mortgage because you'll save less. Still, the steep drop off in mortgage activity has caught some by surprise, especially since the MBA's mortgage finance index just hit an all-time high in early May.

Freddie Mac (FMCC) chief economist Frank Nothaft has been predicting a 10% drop in overall mortgage activity in 2013. The MBA's prediction is for a 20% drop. But in the past month, refi activity, which has made up the bulk of home loans, has plunged 40%. "Look at how fast refis are dropping, and volumes will continue to fall," says Christopher Whalen, a veteran bank analyst at housing finance firm Carrington Investment Services. "This is going to be a big story."
That's particularly true when it comes to the big bank's bottom lines. Mortgage refis had been one of the few bright spots in banking these days. Low interest rates have been squeezing how much banks can make off loans. But that drop in profitability has been made up partly on volume, and nowhere has that been more true than in the mortgage business.
What's more, banks had been benefiting from a weird quirk in bond market. Interest rates on debt backed by Fannie Mae (FNMA) and Freddie Mac loans last year fell faster than mortgage rates. When banks sell their loans to Fannie and Freddie, as they have with most loans since the financial crisis, they make the difference between what they can lend at and what Fannie and Freddie can borrow at, minus a small fee the two giant mortgage insurers take. Last year, that spread had opened up to 2.2%, which was the largest in years. Now the spread is back down to 1.1%.

For the time being, bank executives say they are not too worried. And so far investors seem to be buying that. Despite the recent rise in interest rates, shares of Wells Fargo (WFC), JPMorgan Chase (JPM) and Bank of America (BAC) are up in the past month.
At an investor conference on Wednesday, Wells CFO Tim Sloan said he doesn't see the pool of people wanting to refinance their mortgage disappearing anytime soon. He said an improving economy and revival in the housing market means more people will be eligible for refis. Others have also pointed to the government's modification programs as a continued source of refinance activity.
But of all the banks, Wells stands to lose the most if the refi bust continues. The bank is by far the largest financier of mortgages in the U.S., and has benefited mightily from that in the past year or so. In the first quarter, about $5.4 billion of the firm's revenue, a quarter of its total sales, came from mortgages. Nearly half of that was from fees generated by mortgage refis, which tend to be very profitable.
Right now, the MBA's mortgage index is 30% lower than where it averaged a year ago. If that continues, it could translate into a loss of $800 million in revenue a quarter for Wells. The bank would probably avoid much of that hit in the second quarter, since rates have only been rising in the past month, and mortgages typically take two to three months to close. Also, some of the drop in refis could be offset by more fees due to the fact that more people are buying homes and getting new mortgages.

But that's only if mortgage rates stay where they are. Many people think interest rates could continue to climb, as the Federal Reserve pulls back from its bond buying program. If the 10-year bond was to rise another 1%, not unlikely given how historically low rates have been, bank analyst Keith Murray of Nomura says the rule of thumb is that mortgage refi activity could drop by another 40%.
And yet, shares of Wells are up 5% in the past month and 17% so far this year. Yes, nothing to worry about here.

Short Financial Index SEF   23.63   
Long Term down   Intermediate Term Down  Daily Term down   Short Term up 
Posted by at

No comments:

Post a Comment

Subscribe to: Post Comments (Atom)