Chartists see falling stocks
By MortgageDaily.com staff
8/19/2002

Stocks may head lower, according to some technical analysts. While falling stocks have already clobbered balances in many 401k plans, they usually benefit mortgage originators.

In an article about chartists -- who are technical analysts that study the trading and price history for particular stocks, sectors or indexes and try to pick out patterns -- the Wall Street Journal says these folks see another big dip in the stock market soon.

The story pointed out that July's market lows may be re-tested because some of the people that bought on the way down will sell when it starts to rally back to limit losses. "It feels like a gift to some of those people," Price Headley, president of BigTrends.com was quoted as saying. "That's why the first rally is sold into."

As investors sell shares of stock and flee to the U.S. Treasury market, Treasury yields fall -- pulling mortgage rates down with them. The 10-year Treasury note -- which is closely followed by mortgage market watchers -- closed Friday up 8/32 to yield 4.29%, according to lioninc.com.

Rates had already fallen about as much as any originator could hope. Last week, Freddie Mac reported that the average 30-year fixed rate mortgage was 6.22%, the lowest its been during the past 32 years (and possibly longer). Recently falling rates have driven mortgage loan application activity to near-record levels.

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