At A Glance

  • Volume backing off a bit after rushing to bond market's aid following consumer confidence data
  • stocks return to flat after ticking negative.
  • FN 4.5 at 101-10
  • 10yr Tsy at 3.296
  • S&P about as unchanged as it gets at 1062
  • 10yr futures continue to hold "shelf" from yesterday's close at 118-07

We're about overdue for some triangles wouldn't you say?  Today's post morning correction certainly provides for that.  Triangles mean different things to different people.  Some technical analysts consider a topside breakout to be support for the bullish trendline itself (vice versa for downside breakout), whereas others simply see the occurrence of one breakout before another to speak only generally to the forthcoming trading.  The fact is that triangles occur so frequently in intraday trading that they'll never be as accurate of a predictive tool as I'm sure we'd all like them to be.  For our purposes, it's at least a much quicker way of saying "convergence of competing trends."

As mentioned in AQ's AM commentary, the worse than expected print of Consumer Confidence gave both volume and positive price action a major kick in the pants in the bond market.  Volume was already fairly solid on the morning, but price action not necessarily favorable, especially after the better than expected Case-Shiller results. 

But Consumer Confidence apparently wins the scheduled data grudge match, keeping volume relatively high as long as necessary in order to keep the bond market on it's "shelf." 

The shelf is many things....  For MBS, it's the 100-07 (perhaps 100-08) level discussed yesterday as the highest horizontal price level of significance.  For Tsy's, it's the 3.3 we've all come to know and love in the 10 yr.  For tsy futures, the chart above does an excellent job of showing the shelf at 118-07.  The case for the shelfy significance is greatly edified by the fact that it served as a distinct intraday ceiling yesterday and provided a few stopping points at the close and this morning's open as well.

What does it all mean?  As always, nothing is certain, but it's a good sign that the net-recommendation of today's data is that yesterday's rally (on the heel's of last week's rally!) is that these new higher price levels can be entertained as a potential new range of chopitility boundaries.  For now, the resilience and subsequent recalcitrance (the good kind in which bond markets are refusing to go back underwater) is exceedingly entertaining.  In other words, prices improved past some important levels and are doing an excellent job of holding them even with the return of volume and data.

More volume and data to come in days ahead though...  But for today, it seems appropriate (if not likely), that the triangles in question should break for bond bulls...  Stay tuned...

MBS, Tsy, and LIBOR Quotes