If the markets were to close right now, 10yr yields would be higher than they've been in almost four months.  MBS prices have fallen more in the last two weeks than they have in over four months.  The 4.5 coupon is now discussed not in terms of 102, but rather fighting to stay above 101-00.  The 10yr tsy yield is fighting to stay below the outer limit resistance we've been discussing at 3.56.  It's a bad day.

You might take solace in the fact, however, that important support levels are at least showing signs of life with 100-31 withstanding a couple test so far this AM.  This also helps clarify our stance for the rest of the day: if you're not locked up already, use 101-00 (or 100-31) as your trip wire.  Should prices fall below, we'll alert you asap.

Support at 3.56 is fighting to hold up in Tsy's as well.  It has been broken on a few occasions this AM, and it's viability through the day is a bit more tenuous than MBS support.

But here's where the thinking person's game comes into play.  We've seen this time and time again as we get to the outer limits of the range trade.  Whether it's stronger or weaker, it's not uncommon to see slight variations in technical levels at the limits.  Utter predictability wouldn't make life very interesting right?  Everyone would know to buy right at 3.56 and everyone would make money?  Not likely, right?  This is one of the reasons I like to discuss support and resistance as "bands" or "give or take."  For instance, think back to all the 3.30(ish) levels discussed in a bullish context recently...

So the simple fact of being above 3.57 doesn't mean we won't see it act as support.  The yield curve steepness and year-end window dressing favoring the short end serve to temper the panic of a meaningful break above 3.56 (give or take).

One other silver lining on the MBS cloud is the LONG long-term chart showing that we're more or less in line with levels we discussed a month or so back drawing on ancient and mystical powers of long term trends.

Keep an eye on 101-00.  We'll do that for ya as well...  Also, remember, we can't count any trends "broken" unless they are confirmed early next week.