As AQ noted in the last commentary, sellers dominated after the FOMC statement.  It's fairly plain to see that this was the significant event of the day in the chart below:

The question is, will it be the significant event of the week?  In other words, if the economic data and tomorrow's 7yr note auction go well, can we recapture some of the ground we lost today?  I'm not sure how PROBABLE that is, but it is possible.  It should be noted that for it to be possible, we'll have to have data and the auction on our side.  Given the recent rally and recent price levels, there's nothing about the tradeflows or technical movements that will overcome unfriendly data.  And there's a lot of it, as early as tonight with the State Of The Union Address.

Then tomorrow morning, 2 biggies at 830am with Durable Goods and Jobless Claims.  And even after the last auction of the week--7yr notes at 1pm--there will still be an uncharacteristically data-packed Friday with GDP, ECI, Chicago PMI, and Consumer Sentiment.  The fact that we have all that "stuff" left to come this week, COMBINED with the fact that the late day bond nausea WAS NOT due to any significant material change in Fed Policy, AND that said nausea only left MBS 4.5's at 100-25 versus our recent inflection point of 100-28 and 10yr notes at 3.65 versus recent inflection point at 3.62 (yeah, the charts make things look worse...) AND PERHAPS MOST IMPORTANTLY That the longer term charts are merely showing a movement to a boundary of the range... (for instance, did you see the range in your mind's eye in AQ's last commentary?  I'll help...)

ALL ADD UP to the suggestion that directionality over the next couple days is anybody's ball game.  Defense remains the name of the game, and I think we've been fairly clear in letting you know that "it's getting to be about that time..."   You know... The time that comes after MBS has been giving and giving, and the general trend during the last two weeks has been pretty good...  You know?  The time to give something back?    Well, that's the default stance  in a void of tomorrow and Friday's data, and precisely why I say "rally impossible without supportive data and events."  In other words, without that "stuff," the rally pictured in the chart below is showing signs of exhaustion.  And that makes us defensive.  And that should make you defensive too.