• After doing battle with 99-04, FN 4.5's fight back to end 6 ticks down on the day at 99-08
• Tsy's danced around support at 4.000, finally closing at 3.986.
• In the S&P, 1187+ proved to be uncanny resistance
• Limited data tomorrow AM, 3yr auction at 1pm followed by FOMC at 2pm
  
• On the fence in all 3 markets, which way will the wind blow?

If we're waiting to exhale, we'd do well to carefully consider which way we turn our heads before exhaling as we once again, find ourselves-along with treasuries and stocks--on another seemingly epic fence.  In this case, the pure price levels of MBS don't speak much to the "fence" phenomenon, but 4.0 on a 10yr treasury sure does.  Stocks have a strong technical crossroads theme as well.

What does that all mean?  Long story short, for months, technical price levels have served as the magnetic points to which market prices have tended to dock overnight.  As bigger potential shifts approach, we notice the 10yr moving toward larger and longer term magnetic points as they await some important data that could push them to one side or the other.  It's as if we're on a fence, where a well-bid auction cycle with decent to lower yields will be a big push toward the better side of the fence.

Charts today already laid this out with the long term view, so since nothing changed with respect to these technical fences between now and then, here are MBS, treasuries, and stocks seen in shorter time frames, each doing battle with their respective levels (for MBS and treasuries, they're "support" levels as they prevented prices from moving lower or yields moving higher.  In stocks, they're "resistance" levels as they prevented prices from rising).  It should also be mentioned that the technical significance of today is limited due to the low volume.

Perhaps the most well-behaved showing of technical resistance or support today was seen just over 1187 where the S&P encountered brick-wall-like resistance.

Unfortunately, these charts don't so much suggest what's going to happen tomorrow as they are simply as logical termination of the day's earlier trends.  At least they let us know that the market is trading as we'd expect given the data behind us and the more important data to come.

The bulk of importance for the rest of the week lies with the treasury auctions.  Tomorrow's 3yr at 1pm is certainly not the most important of the 3 considering that 10's and 30's follow, and do more to relate to the duration of MBS that dictate our pricing.  In other words, a 10yr note lasts a length of time that is much more similar to MBS 4.5's than a 3yr note.

FOMC minutes hit at 2pm tomorrow, but they'd have to be pretty outlandish to speak much to the 4.0 level in treasuries unless the 1pm auction is a completely vanilla "100% as expected."  That means that a stronger than anticipated auction will likely leave the 10yr note in the 3's whereas a weaker than expected auction may push things into the 4's even before FOMC minutes. 

This also assumes that the market is trading where it wants to be trading tonight, and that a lot of the participation that re-enters tomorrow will generally agree with the levels.  Nice thing here is that if the extra bodies and dollars disagree with where the market is trading, it would likely be to the effect of thinking yields are too high, or more diplomatically, have tested 4.0 too soon.  Not likely, but a girl can dream...

Speaking of dreams, have sweet ones about the auction tomorrow.  Remember, that it's not enough for us to hope for a high "bid-to-cover" as this demand metric SHOULD do well tomorrow given the relatively higher yields than recent auctions.  We'll also need the bidding to stop out at a high yield that's very close to and hopefully lower than 1.75.