Seems like the title should have one more word right?  More what?  Sadly, it was intentionally obfuscated as the only thing we can really be certain of tomorrow is that there will be "more."

more volatility?

more movement?

more data?

more significance?

more narrow ranges?

more uncertainty ahead of significant data?

 

...a heartfelt and emphatic "maybe" to all of the above.  Well, we do already know there will, in fact, be more data. 

  • 9am - Case Shiller HPI
  • 10am - Consumer Confidence
  • 10am - State Street Investor Confidence
  • 1pm - 2yr note auction  (quite interesting in the wake of the miniature shake-up of short end of curve)
  • 5pm - daily dose of fed-speak from Bullard

And that data--some of it operating of its own accord, but the combination certainly--has the potential to deliver "more" of everything else that was either painfully absent (or painfully present) today.  For instance, an outlying data event could contribute to more movement and volatility.  A couple outliers could add "significance" to that.  But as always, all could be offset by an equally deviant 2yr auction, thus returning us to "uncertainty" ahead of "significant data" in the form of the rest of the week's packed econ calendar. 

As for today, I'll let the MBS Ninja and the charts do the talking.

Modest reversal of fortune for MBS as it revisits the good old days, before GSE premium buyouts and a lever or two of selling along the lower-production coupon stack. As the market day-trades itself to while away the hours and weeks before Fed bid removal procedures, the wides of the prior session are reversed out to make room for the wides of some other future session. So as not to get carried away in any form, higher coupon 6%s and 6.5%s lagged that move as even dollar rolls (mg says: that's the difference between the current MBS coupon and the following month's price) were under-performers ((down ¼ to one half of 1/32nds). Not to get carried away for sure, today was a range-bound day in many respects in that there were few data points and that usually portends a "grinder" as little is offered up as resistance to firming.

Look for more day-trading like rallies and pull-backs ahead until some substantive events and or data (NFP next Friday) can be offered up to dissuade and or encourage something to widen the range trade.

Luv ninja

And here's how it all looked on the charts, with some added perspective brought to you from a zoom out to a slightly wider view:

Takeaways from the chart above: starting on the bottom with tsy's, read this as an exceedingly narrow range that is not likely to hold up for long.  With the upper end of the yield range at 3.8, the technical read would suggest the annual highs near 3.83 on the topside and the next closest resistance at 3.72 for a test in case of bullishness.  MBS trading range is just as narrow, though more directional.  The fact that the directionality was thwarted by repeat resistance should have us watching that 100-12+ level, or close to it, for potential shifts in trend.

But far more interesting than either of these would be the long term stock chart.  If you were nodding your head in curious agreement when I alluded to some sort of market conspiracy this week, this chart may allow your  continued stay in the "believer" camp.  Before we go on, I should say that I'm not a believer of any particular conspiracy about some SHIFT in market sentiment this week, but I'm also not an unbeliever.  Why?

  • Tons of Fed-speak,
  • another round of auctions,
  • last full week of the month immediately preceding the month in which the Fed pulls out of MBS, 
  • GDP Friday
  • 2 reads on consumer sentiment/confidence
  • follows first headline-worthy FOMC news that actually begins to peel away some effects of QE (not that big of a deal, but "a deal" nonetheless... maybe even a test of the proverbial waters?)

And all of the above just as the broadest metric of the stock market (loosely correlative to "recovery sentiment") must either make fresh highs after selling off in January or fall below a well established uptrend...

I suppose we can't really call that triangle "epic" if it's only drawn on a 5-6 day chart, but the direction of the impending breakout could very well be important.  Given recent connectedness of the stock lever in a general sense, let's hope it breaks out on the downside. 

As far as tonight and tomorrow, if you're into a bit of overnight risk, this is still not the most exciting data of the week or even the most significant auction as far as MBS are concerned, so if you're pressing your luck by avoiding pressing the lock button, the POTENTIAL damage for a bad call is lower than the rest of the week, but at the very least, the potential for "something" to happen is MORE than it was today.

(translation: with more data and events comes more chance for movement in either direction and in greater amounts, but still not as much potential as the later days in the week.  Adjust risk accordingly...)