Overnight market movements saw MBS and Tsy's move to their worse levels since mid July.  Shortly thereafter weaker than expected ISM data gave equities a nudge lower, helping fixed income recover to somewhere slightly better than yesterday afternoon's range-bound lows.  But as has been the case more times than we can count over the past few weeks, an otherwise dead stock market getting the necro treatment by day's end, pulling major averages higher and higher into the afternoon.  When all was said and done both MBS and tsy's found themselves right back in line with the worse levels from the AM, essentially the same spot on the curb where foreign trading dropped them off for us this AM.

As you can see, we've broken below the long term trendline that we discussed in detail yesterday.  In that discussion we reminded you that the breaking of such a trend line does not necessarily connote further losses, but if tomorrow's momentum continues in the same direction and at the very least, keeps prices under the trendline, then chances were better of the previous trend being concluded.

All that said, I would give even more credence to our latest grammy award winning double platinum rap single: Day Trader's Paradise...

As I see no more rallies for the MBS
I take a look at my pipe
And realize there's nothing left.
'Cause I've been floating with positions so long
That even my momma thinks that old locks are blown.
But I ain't never floated deals, that didn't deserve it.
Massive Sell-Off overnight?, you know that's unheard of!
You betta watch how ya tradin'
What stock rallies you fadin
Or your MBS gurus won't have room to talk.
I really hate the spread but I gotta lock,
As they buy stocks, I see myself in line for docs.
Fool, I'm the kinda LO all you fellows wanna be like,
Hedged my pipe in the night
Saying thanks to that MBS site!

We've been spending most July living in a trader's paradise...

We've been spending most our time living in day trader's paradise...

Look at the situation, this disconnected tradin'
I can't put out a decent quote, they keep raising the rates!
So I gotta be down with AQ and MG,
Too much CNBC watchin', got me chasing dreams.
I'm an educated LO with rebate on my mind
But even three eighths in my hand makes a gleam in my eye.
My pipe's all locked up bankers!  I'm out of danger!
And my junior LO's got lock sheets so don't arouse my anger.
Fool, emails from Provi ain't but a day trade away,
Instead of living life do or die, I'll live to lock another day!
I'm at five point five now, will I live to see five point fo?
The way traders tradin' I don't know.

Tell me why do we
chase more Y - S - P.
When the ones who win
All trade on Wall Street?

Just spent most of July Livin' in a Trader's Paradise

Why're we spendin' so much time writing on Day Trader's Paradise?

So...?

Why ARE we spending so much time talking about technicals and trader's worlds, etc...?

Today is a good example with "going out" prices matching opening levels against the backdrop of offsetting data penalties while we wait for the week's more important data.  Given the play by play of today's events and the upcoming calendar, in retrospect would you really expect today's net effect to be greatly unchanged from yesterday's?  Let's see...  No major suggestions from data....  More important data yet to come...  Yeah...  Trader's paradise...

So we persist with the same old song and dance of offerring up technical levels.  Price action in 4.5's over the past two months has been an orgiastic frenzy of technical bounces and all of the following levels have come into play...

99-19 we broke today, and it coincided with the triangle line, and it coincided with the 50% retracement...  All bad things technically speaking, but of course requiring more confirmation...  Next down would be just below current prices in the 99-08 to 99-10 range...  Could provide support, but more importantly, if it breaks by more than a few ticks in the AM, next test likely to be at 'ol faithful = 99-00 (give or take a few ticks).  We haven't gone below 99-00 in Q3, so if that occurs, it will likely coincide with AQ and I hitting you with some new considerations and strategies...

For now...  don't try to win against the trader's world.  However, that does not mean you should be locking everything early and often.  In fact, the way I see it, we are very much at the BOTTOM of a fairly long term range.  Conversely, the fact that we are at the bottom does not mean that we won't go any lower, but simply that I'd probably either want to see a convincing shift past that long term "99 to 101" range trend or to have enough of an assumption about how Friday and beyond would play out that I could make a decision in advance of the important data and important week ahead.

It's too bad NFP comes out so early in the AM on Friday...  If only there were a relatively large and well-known lender with 24 hour price protection...  And I assure you, that is in no way a joke, but rather a respectful eulogy of a company, on a mass scale, staying committed to what I think was one of the best tools available to the early-morning-riser MBS devotee...  If you know what I mean, you know what I mean.