Posted
It was a fairly anticlimactic trading day on which to hit the highest closing prices in the history of the 4.5 MBS. With limited data to either douse the dreams or fuel the fires of Dubai-induced flights to quality, bonds were forced to turn to Chicago PMI as the sole appetizer to a more robust offering of post-holiday fare later in the week. And as is the case in many households, sometimes the most anticipated part of Thanksgiving is the week of leftovers that follows. Whatever the case, the rest of your charts this week will not be the orderly movement of decreasing volatility within a range as seen below.
The theme even plays out in the long term chart as we can see wider and more volatile ranges evolving into the more narrow and contained rally that has defined recent months. More of a point of curiosity than anything, but whenever MBS close at all time highs, we're obligated to put the long term chart up.
It was a similar story in Tsy's as the 10yr pushed into levels not seen since May before settling in line with the only other instance of these yields since then in october. You may notice a perfectly linear and orderly ________, a technical pattern we often discuss...
As far as stocks are concerned, yesterday's closing levels did not hold up as resistance, as money was flowing into the market on all fronts. But other resistance was happy to step up to cap further advancement at 1097.
Zooming out a bit, we can see the same level come into play over the past few weeks... This isn't one of those epic levels that is never broken, but it's gotten more than it's fair share of medium term roles as resistance, denote by the white circles.
So with all time highs in MBS known, and a potentially faltering stock rally the talk of the mainstream financial town, what's the long view on the underlying on the broader rates market? In short, not as good as MBS would have you believe... Yes, tsy's have broken resistance around 3.3, which is 119-29 (ish) in tsy futures, but the red line on the chart below showed you that with 3.3 broken (and maybe even without it broken), 3.2 was perhaps a more pertinent long term resistance point as it was the absolute yield low since the spring. After that, 3.12 comes into play with the springtime lows themselves that begin to approach 3.0. And a thick swath of supportive bounces at 3.0 show us that the level is more than just a nice round number.
All in all though, tech's aren't the best place to be looking for near term directional guidance on NFP week, especially not with today's volume. In fact, the noticeable high water marks in volume over the past several months have been when it has risen in support of 3.3 as resistance. So the push into 3.2 to start the week, to me at least, feels like an exhibition game compared to the real deal which we'll likely get to see in short order.
TOMORROW's DATA AND EVENTS
- First Day Of December
- ISM MFG index at 10
- Construction Spending at 10
- Pending Home Sales at 10
- Fed Plosser at 1220