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Ken Caiani

Ken Caiani Group

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Weekly Review Here is the week’s review of the news that affected the financial markets during this past week. Monday… was characterized by market indecision and uncertainty for both stocks and bonds resulting in teeter-totter market action. Equities opened higher, but then faded lower as investors sold into strength. Bond prices improved from a mostly flat opening when equities were unable to build on the prior Friday’s upward reversal. There was no economic news to help provide market direction, but it seems the S&P 500 is running into technical resistance at the 1,980 level where the 25-day and 50-day front-weighted moving averages have converged.

The FNMA 30-year 3.5% mortgage bond and 10-year Treasuries moved to their best levels of the session when the major equity index averages gave up their early gains and slipped into negative territory, but then gave up some of those gains when equities attempted an afternoon rebound.

For the session, the yield on the 10-year Treasury traded 1.6 basis points lower to yield 2.42% while the FNMA 30-year 3.5% coupon bond added 10.9 basis points to close at $102.81. For stocks, the Nasdaq Composite Index lost 20.82 points to end at 4,454.80.

Contents

• Weekly Review: week of October 6, 2014

• Mortgage Rate Forecast with Chart

• Economic Calendar - week of October 13, 2014

• Federal Reserve FOMC Meeting Schedule

• Road Signs - Maximize Your Memory and Have Fun Doing It

The Dow Jones Industrial Average dropped 17.78 points to close at 16,991.91. The S&P 500 Index declined 3.08 points to finish at 1,964.82.

Tuesday… equities sold off from the opening bell while bond prices surged higher with the 10-year Treasury yield dropping to its lowest level in over a month. A weak performance in European equity markets spilled over into our markets.

Several mediocre economic reports weighed on stocks including the International Monetary Fund (IMF) downgrading its global growth forecast to 3.8% from a prior forecast of 4.0%. Germany, as Europe’s strongest economy, also worried investors when it was reported German industrial production plunged -4.0% month-over-month following last quarter’s -0.6% annualized decline. Germany is now on the brink of a recession.

Domestically, there were several corporate profit warnings that unnerved investors. AGCO Corp. (AGCO), Christopher & Banks (CBK), and SodaStream International (SODA), all provided guidance for lower third-quarter earnings and their stock prices were hammered lower with above average trading volumes.

In other news, CoreLogic released its August Home Price Index (HPI) report showing home prices nationwide, including distressed sales, increased 6.4% in August 2014 compared to August 2013. On a month-over-month basis, home prices nationwide, including distressed sales, increased 0.3% in August 2014 compared to July 2014. This change represents 30 months of consecutive year-over-year increases in home prices nationally. CoreLogic is also forecasting home prices, including distressed sales, are projected to increase 0.2% month over month from August 2014 to September 2014 and, on a year-over-year basis, by 5.2% from August 2014 to August 2015.

For the session, the yield on the 10-year Treasury traded 7.9 basis points lower to yield 2.34% while the FNMA 30-year 3.5% coupon bond gained 39.1 basis points to close at $103.20. For stocks, the Nasdaq Composite Index lost 69.60 points to end at 4,385.20. The Dow Jones Industrial Average fell 272.52 points to close at 16,719.39. The S&P 500 Index declined 29.72 points to finish at 1,935.10.

Wednesday… the stock market opened flat and slipped lower while the bond market opened a little lower then moved into positive territory when equities extended their losses in the early going. For equity investors, global growth concerns remained in focus after China's HSBC Services PMI slipped to 53.5 from 54.1 and less than the consensus forecast of 53.8. Then about 12:00 ET the stock market began to recover and turned positive while bonds faded lower “into the red.” This action was followed by a huge price spike higher in both bonds and stocks following the release of the Federal Reserve’s minutes from their Sept.16-17 policy meeting. All-in-all, it was a choppy, rollercoaster ride of a trading session. The Mortgage Bankers Association’s (MBA) Weekly Mortgage Applications Survey for the week ending October 3, 2014 showed mortgage applications increased 3.8% from one week prior. The Refinance Index increased 5% from the previous week while the seasonally adjusted Purchase Index increased 2% from one week earlier to the highest level since early July. Refinances remained unchanged at 56% of total applications from the prior week. The adjustable-rate mortgage (ARM) share of activity increased to 7.8% of total applications. The average contract interest rate for 30-year fixed-rate mortgages with conforming loan balances fell to 4.30% from 4.33%, with points falling to 0.19 from 0.31. The average contract interest rate for 30-year fixed-rate mortgages with jumbo loan balances dropped to 4.21% from 4.28%, with points increasing to 0.29 from 0.15. At 2:00 p.m. EDT, the Federal Reserve released its minutes from their Sept.16-17 policy meeting and the minutes were perceived as being “dovish.” Both bonds and the major equity indexes spiked higher following the release. The catalyst for the move appears to stem from what Fed officials voiced as a global slowdown as a potential risk to the U.S. economy. This is undoubtedly being perceived by the financial markets as a sign the Fed will not be in any hurry to raise the fed funds rate any time soon. At the close, the yield on the 10-year Treasury traded 2.3 basis points lower to yield 2.32% while the FNMA 30-year 3.5% coupon bond gained 32.8 basis points to close at $103.53. For stocks, the Nasdaq Composite Index gained 83.39 points to end at 4,468.59. The Dow Jones Industrial Average soared 274.83 points to close at 16,994.22. The S&P 500 Index added 33.79 points to finish at 1,968.89. Thursday… concerns over slowing global growth reared its ugly head again helping to trigger another sell-off on Wall Street. Selling pressure accelerated for equities following a speech by European Central Bank President Mario Draghi when he said “Europe faces structural problems, not just cyclical, as potential growth is too low out of high unemployment.” After the largest one-day gain of the year yesterday, stocks once again were pummeled. The 10-year Treasury traded flat for most of the day while the FNMA 3.5% 30-year bond was hit with some profit taking after a huge run higher (+217 bp) since September 18. News of German exports plunging 5.8% percent in August amplified investor anxieties that Europe's largest economy is slipping into a recession. It was the worst decline in exports for Germany since January 2009. If Germany moves into recession, Europe as a whole could follow. Another factor coming into play is a stronger U.S. Dollar which cuts into the profits of U.S. multi-national corporations who derive a substantial portion of their earnings overseas. The energy sector in particular is getting drilled by a global slowdown in economic expansion with oil prices falling by $20/barrel since earlier this year.

In economic news, Initial Jobless Claims declined to 287,000 for the week ending October 4 from a slightly downwardly revised 288,000 for the week ending September 27. The consensus forecast called for Initial Claims to increase to 295,000. Continuing Claims fell to 2.381 million for the week ending September 27 from an upwardly revised 2.402 million for the week ending September 20. The consensus estimate called for an increase to 2.425 million. Domestically, Wholesale Inventories increased 0.7% in August after increasing an upwardly revised 0.3% in July. The consensus forecast called for Wholesale Inventories to increase 0.3%. Durable Inventories increased 0.8% in August, up from a 0.4% gain in July while Nondurable Inventories increased 0.5% after no growth in July. Overall, the day’s domestic economic news was positive but the stock market ignored it while the bond market mostly traded sideways. For the session, the yield on the 10-year Treasury traded 0.90 basis points higher to yield 2.33% while the FNMA 30-year 3.5% coupon bond lost 5 basis points following a 28 basis point reset or rollover to close at $103.20. For stocks, the Nasdaq Composite Index lost 90.25 points to end at 4,378.34. The Dow Jones Industrial Average cratered 334.97 points to close at 16,659.25. The S&P 500 Index traded 40.68 points lower to end at 1,928.21. Friday… concerns about global economic growth continued to plague global markets including Wall Street. Major European equity indexes traded lower with Germany's DAX recording the greatest loss (-2.40%) amid speculation Germany’s government could lower its GDP forecast for 2014 and 2015. The markets in Asia were also notably lower with pronounced weakness in Japan, Australia, and Hong Kong. U.S. stocks opened lower with the major indexes subsequently trading down to test support at their 200-day moving averages except for the Russell 2000 which has been below this key support level for about three weeks now. The 10-year Treasury yield dropped several basis points, but the FNMA 30-year 3.5% coupon bond continued to slip lower. Economic data did little to put a dent in the negative bias as September Export Prices fell 0.2%, close to estimates for a 0.1% drop. Led by falling energy prices, Import Prices were down 0.5% last month, missing estimates for a 0.8% decline. For Friday’s session, the yield on the 10-year Treasury traded 4.5 basis points lower to yield 2.28% while the FNMA 30-year 3.5% coupon bond traded 3.1 basis points lower to close at $103.17. For stocks, the Nasdaq Composite Index plunged 102.10 points to end at 4,276.24. The Dow Jones Industrial Average lost 115.15 points to close at 16,544.10. The S&P 500 Index dropped 22.08 points to finish at 1,906.13. For the week, the FNMA 3.5% coupon bond gained 46.9 basis points to end at $103.17 while the 10-year Treasury yield fell 15.4 basis points to reach 2.28%. Stocks ended with the NASDAQ Composite losing 199.38 points, the Dow Jones Industrial Average dropping 465.59 points, and the S&P 500 falling 61.77 points. Year to date for 2014, the NASDAQ Composite has gained 2.33%, Dow Jones Industrial Average has lost 0.20%, and the S&P 500 has gained 3.03%. The national average 30-year mortgage rate fell from 4.15% to 4.07% while 15-year mortgage rates dropped from 3.32% to 3.26%. FHA 30-year rates remained at 3.75% and Jumbo 30-year rates fell from 4.02% to 3.95%.

Mortgage Rate Forecast with Chart

The FNMA 3.5% coupon bond ($103.17, -3 bp) gained 47 basis points during a week characterized by increased market volatility. The bond is now trading between support at $103.00 and resistance at $103.35. Friday’s negative candlestick is a “spinning top.” This type of candlestick is often regarded as “neutral” and is interpreted as a signal of market indecision about future direction. Last Thursday there was a sell signal from a negative slow stochastic crossover and this signal was reinforced on Friday. If the bond continues to fall as the technical indicators suggest and support at $103.00 fails to hold, the next level of support is found at $102.41. A subsequent pull-back to the $102.41 level would result in slightly worse interest rates. However, the stock market continues to look very weak with most of the major indexes breaking below their 200-day moving averages, a strong technical sell signal. If stocks continue their downward slide and fall into a full-blown 10% correction, we could see a bounce higher in bond prices resulting in lower yields and interest rates. Chart: FNMA 30-Year 3.5% Coupon Bond

Economic Calendar - for the Week of October 13 The economic calendar activity increases this coming week. Wednesday’s release of Retail Sales, Producer Price Index, NY Empire State Manufacturing, and the Fed’s Beige Book will certainly garner attention. Thursday’s Initial Jobless Claims and the Philadelphia Fed Manufacturing Index will also interest investors along with Friday’s release of the latest University of Michigan’s Consumer Sentiment Index. Economic reports having the greatest potential impact on the financial markets this week are highlighted in bold.

Date Time ET

Event /Report /Statistic For Market

Expects Prior

Oct 15 07:00 MBA Mortgage Index 10/11 NA 3.8% Oct 15 08:30 Retail Sales Sept -0.1% 0.6%

Oct 15 08:30 Retail Sales ex-auto Sept 0.3% 0.3% Oct 15 08:30 PPI Sept 0.1% 0.0%

Oct 15 08:30 Core PPI Sept 0.1% 0.1%

Oct 15 08:30 NY Empire State Manufacturing Oct 20.0 27.5 Oct 15 10:00 Business Inventories Aug 0.4% 0.4% Oct 15 14:00 Fed's Beige Book Oct NA NA Oct 16 08:30 Initial Jobless Claims 10/11 290,000 287,000

Oct 16 08:30 Continuing Jobless Claims 10/04 2,400,000 2,381,000

Oct 16 09:15 Industrial Production Sept 0.4% -0.1% Oct 16 09:15 Capacity Utilization Sept 79.0% 78.8% Oct 16 10:00 Philadelphia Fed Manufacturing Oct 20.0 22.5 Oct 16 10:00 NAHB Housing Market Index Oct 59 59 Oct 16 16:00 Net Long-Term TIC Flows Aug NA -$18.6B Oct 17 08:30 Housing Starts Sept 1,022,000 956,000 Oct 17 08:30 Building Permits Sept 1,040,000 998,000 Oct 17 09:55 Univ. Michigan Consumer

Sentiment Oct 84.0 84.6

The Remaining 2014 Federal Reserve FOMC Meeting Schedule

October 28-29

December 16-17*

* Meeting associated with a Summary of Economic Projections and a press conference by the Chairman. Road Signs – Maximize Your Memory and Have Fun Doing It

By Heidi Alexandra Pollard

Remember these four words and see if you can recall them by the time you finish reading this article: apple, penny, key, admire. Have you ever noticed that as you get older, time just seems to fly by? Time doesn't speed up as we age, but this perception is a result of your aging brain and the loss of neural connections. In other words your memory, or lack of it, plays a huge part in your perception of time passing quickly. Use it or lose it Scientific research has proven that an active brain is a healthier brain. We all know muscles lose strength and power from lack of exercise, but it's ironic we often forget that our brain needs stimulation to maintain cognitive, reasoning, and memory functions. If you let your brain power diminish as you age, you may end up impacting your quality of life now and into the future. Doesn't everybody want to perform at their peak in their professional life and remain nimble, sharp, focused and independent as we age? According to the brainHQ website, memories are made up of what you sense - what you see, hear, taste, smell, and feel.

"When memory fails, it's not because you forgot how to remember. It's because your brain isn't processing what you see and hear very clearly, so can only store "fuzzy" pictures of an event." Exercising the brain maintains healthy neural pathways, improves focus, and increases attention span and creativity. Importantly, you not only maintain memory capacity, but you can improve it. How? Here are some simple techniques you can use to boost your memory:

• Write down (so you can see it) or say out loud (so you can hear it) things that you need to

remember - such as your shopping list

• During a meeting, seminar, or in any situation, focus on what you can hear, see, smell, and feel to increase your memory of even the smallest detail

• Visualize the things, facts, or events you will need to recall later - this works just like when you look at old holiday photos and how it jogs a your memory about the details of that particular place and experience

You can also maximize your memory and brain function by having fun! Games enhance brain function Games that increase spatial awareness, finger dexterity, depth perception and differentiation between images, shapes and colors are just a few of the benefits of engaging in brain-boosting activities. A jigsaw puzzle (I love those 1000 piece tiny puzzles) will test all of these areas and establish neural pathways that force your brain to compare what you see with what you feel, incorporating those two senses together. Classic board games such as chess will keep brain cells active and firing on all cylinders, improving strategizing, thinking and reasoning skills. Crossword puzzles are not just a fun thing to do on Sunday morning with a hot cuppa, but they increase and encourage memory retention, literally forcing the brain to recall links between word definitions, descriptions and language. You can also carry out simple day-to-day chores differently to challenge your brain. When was the last time you tried brushing your teeth with your non-dominant hand? How about throwing a ball? Try it. The results can be hilarious, but very beneficial. You'll discover that coordination is all in your mind. There is a plethora of online mind games available at your fingertips, but a great one I found is on Sharp Brains. Check out their top 50 brain games and teasers. You're never too old or too busy to keep your mind active and stimulated. You're never too old or too busy to play a game once in a while, and you're most certainly never too old or too busy to enjoy a good laugh. How powerful is your memory and focus? Can you remember the four words from the start of this article? Coach, author, speaker, teacher and entrepreneur, Heidi Alexandra Pollard, The Communicators' Coach publishes Value Ad, a free monthly ezine for smart, savvy professionals who want more prosperity, passion and purpose in life. If you're ready to jump start your success, make more money and have more fun doing it then get your FREE tips now at http://www.leadingvalue.net © Leading Value 2012.