Shortly after the completion of Bernanke speech to the economic club of Washington, MBS moved slightly lower off their highs of the day at 101- 27, but at 101- 24, this constituted only a four point drop from the highs. The overriding theme of the day is still one of almost inconsequential directionality in low-volume trading. Perhaps equally important but something that got plenty of attention from us on Friday is the fact that we have moved from one range to another. You'll notice the charts below that the highs in MBS and lows in treasury yields correspond to the technical levels discussed on Friday night as potentially indicative of a simple movement to a previous range.
While it's true that MBS seem to have encountered noticeable resistance at 101-26, given that this is the resistance level discussed on Friday, we wouldn't necessarily expect prices to move much higher especially considering that treasury yields have failed to move lower than 3.42 a level discussed by AQ this morning. in fact this is the nature of a range trade and although we do lament that we moved out of the previous range, this is about as good as we could have hoped for considering the price direction on Friday. The next chart in treasuries shows a little bit more clearly, the weakest points reached early Friday morning after a the better than expected NFP reading.
After finding support at the 3.50 level treasuries moderately into Friday afternoon in a technical and rangebound on pattern. we did stand some measure of risk this morning that the market simply stopped at 3.50 on its way to higher yields, namely the 3.56 levels that previously served as technical resistance. Thankfully, our next stopping point on the range-bind superhighway is simply the most central, broadest, and recurring range of the past several months with support at 3.50, numerous technical stops along the way, and running into resistance first at 3.38 inflection point, with 3.30 or thereabouts as the hardest-to-break resistance.
Stocks are right back to the old ways again after quite a bit of chopatility on Friday. you can see in the chart below that of the extremely resistant level of 1110.00, despite some severe intraday breakage on Friday, continues to hold firm and is now the longest running resistance-high at the S&P has encountered in its epic, and freight train like rally.
Indeed at least on an intraday level it seems that 1110.00 is providing an uncommon amount of resistance as the standard case has been for a bit of "dancing around the level"as opposed to outright failure to play through the level. There's no telling whether or not this is actually important given the white circles noted above in the treasure chart which will show you that volume is almost catastrophically lower than it was on Friday.
Bottom line: everybody is fond of saying that lenders will take away faster than they give it back and it's very likely that Friday was no exception for most of your rate sheets. with that in mind you probably have some floating to go before recouping the same rates that you had available to you on Thursday afternoon this and might or might not pay off given the limited data week, and the treasury auctions beginning tomorrow against the backdrop of the normally supportive events for MBS. As always will know more about that as the day and week progress.