Any time we see an Employment Situation report come in as strong as last Friday's, it causes some measure of concern for follow-through trading.  Indeed, big beats or misses on the big jobs report historical tend to create momentum for much of the remaining month more often than not.  On a hopeful note, however, 2014 has certainly been a departure from the trend as US bond markets have grown increasing detached from US economic data.

Of course European economic uncertainty is one of the key factors in that departure.  As such, it's made great sense to keep an eye on goings-on overseas.  But this week isn't as robust for  Europe either, in terms of big-ticket scheduled events.

That leaves supporting actors like "technicals" (trading decisions based purely on trading levels and math) with bigger roles in determining this week's trends.  With that in mind, here are some of the technical considerations.

First and foremost, Friday's trading established good short-term support at 2.33 in terms of 10yr yields (we would talk about 103-18 for Fannie 3.5s, but considering "the roll" is coming on Tuesday night, it doesn't make as much sense to get hung up on levels).  If that ends up holding, all the better.

But the broader trends in mainstream technical indicators are all skewed negatively at the moment.  This was in limbo until Friday.  The chart below shows several of those mainstream technical studies (Bollinger Bands, Stochastics, MACD, and RSI) all in the midst of negative patterns.  Fortunately, the second part of the chart not only makes it clear that there's plenty of room in the long-term trend before it's even close to being challenged, but also that we're not even back to the mid-point yet. 

2014-12-7 techs

The focus on technicals here isn't meant to imply that calendar events can't and won't matter.  There are a few to be aware of.  Earlier in the week, the Treasury auction cycle stands out among domestic events as Wednesday brings the last 10yr auction of the year.  From there, Thursday does most of the heavy lifting in terms of economic data, anchored by Retail Sales at 8:30am. 

MBS Pricing Snapshot
Pricing shown below is delayed, please note the timestamp at the bottom. Real time pricing is available via MBS Live.
FNMA 3.0
100-14 : +0-00
FNMA 3.5
103-24 : +0-00
FNMA 4.0
106-17 : +0-00
2 YR
0.6590 : +0.0157
10 YR
2.3190 : +0.0125
30 YR
2.9680 : +0.0029
Pricing as of 12/8/14 7:30AMEST

Tomorrow's Economic Calendar
Time Event Period Forecast Prior
Tuesday, Dec 09
10:00 Wholesale inventories mm (%) Oct 0.2 0.3
10:00 Wholesale sales mm (%) Oct 0.1 0.2
13:00 3-Yr Note Auction (bl)* 25
Wednesday, Dec 10
7:00 Mortgage Refinance Index w/e 1341.1
13:00 10-yr Note Auction (bl)*
Thursday, Dec 11
8:30 Import prices mm (%)* Nov -1.8 -1.3
8:30 Retail sales mm (%)* Nov 0.4 0.3
8:30 Export prices mm (%)* Nov -0.5 -1.0
8:30 Initial Jobless Claims (k)* w/e 295 297
8:30 Continued jobless claims (ml)* w/e 2.350 2.362
10:00 Business inventories mm (% ) Oct 0.2 0.3
13:00 30-Yr Bond Auction (bl)*