True, this is the "MBS" Commentary, and while MBS were at their weakest levels in almost two months, we wouldn't expect them to be visiting their August levels given the steady tightening in spread of MBS to Tsy's in that time.  So tonight's title goes to treasuries--namely, the 10yr.  While it was only down a tick on the day, the current yield of 3.552 marks the highest point since bonds began to creep out of the summer doldrums in August.

What better place to be considering the pivotal nature of the season and the impending data?!  Of course we have the FOMC announcement on Wednesday.  This comes amidst growing economic support for the recovery, an ever-ticking death clock on bond-friendly stimulus, an inflation report that may show year-over-year plus signs for the first time since February, and the mounting evidence that yes, the recession will actually be over someday and the Fed must adjust policy accordingly.

I suppose the fact that the aforementioned death clock also ticks on stimulus that some think is artificially propping up the recovery would be a good reason we don't see bonds making a mad dash for loftier yields.  Simply put, there's still plenty of uncertainty, but as we've seen in the recent past when that uncertainty seems to be leaning in an economically positive or bond-negative direction, yields push the extreme outer limits of recent ranges.

Despite a 5 tick loss in MBS 4.5's today bringing the price to 101-03, the progressive tightening this year leaves that big picture in somewhat better shape than treasuries.  Rather than flirting with 4 months lows, MBS have actually experienced these prices as recently as a month ago.  That immediately preceded a rally, and it's the same story with the last noticeable valley in prices in late October.

Your eye may indeed pick up on some measure of symmetry in the last two cycles, and in fact the fall from highs to lows in October is very close to the same speed and magnitude of our recent cycle of price losses.  If the cyclical trend is indeed significant, that would bode well for prices in the coming days.  I'd caution you not to get exceedingly hopeful about that, however, considering that data and events this week and through year-end have more to do with the direction of prices than the range-trading patterns in the fall.

That's not to say the range is not pertinent though, as it obviously was and is.  In MBS, the most noticeable price level in the current range would be the recurring resistance we've experienced in recent days around the 101-10 level.  Not fun to keep hitting our head on the ceiling, but then again, it does set up that price level as a nice trip-wire to move to a more positive lock/float stance--at least in the short term.  Conversely 100-31 could serve the opposite role.

The technical support level in tsy's needs no introduction.  Just remember if things start backing up over 3.55 in tsy's that we're looking for VOLUME, length of time, and resolution of impending data to help confirm an actual breakout. In other words, that's why Friday morning's breakout never materialized as an actual breakout.

To round out the breakout discussion, there's stocks.  For the first time since the market crashed late last year, the S&P--a broader and less emotional indicator than the Dow--closed measurably above the long-tracked resistance at 1110.  Granted, it's a pretty small measure, and on an exceedingly low-volume day, but it nominates stocks to be closely watched in days to come in order to determine if the recent range has been a consolidation before moving higher or a "stalling" before a correction.

The clues that inform all of the above eventualities start to roll in with tomorrow's Econ data before seriously ramping up on Wednesday.

• PPI and Empire State Survey both at 830 AM.  As mentioned, the PPI is expected to show the first YoY positive reading since February (and before that November)
• Treasury International Capital at 900AM
• Industrial Production at 915AM
• A few short term bill auctions and finally the housing market index at 1pm

If the bulk of the data is decidedly bullish, we could see the outer limits of the range stretched even more than weeks past as yields get their biggest "lead off' yet heading into FOMC.  But mixed or economically bearish data stands a good chance of helping to reinforce the current range, leaving any breakage duty up to Uncle Ben and the Gang.