Bond markets are currently in a sort of disheartening position.  The Fed rate hike means that most rates should move higher, even if that happens with various combinations of steps forward and backward for longer term rates like 10yr Treasuries and mortgages.  The longer the economy endures the new Fed Funds Rate, the more mortgage rates will have to play along with the "rising rate environment." 

I wouldn't be surprised to see a sort of "aha moment" play out in markets in the coming months where an initial illusion of economic endurance results in a somewhat quicker move toward higher rates than we've seen so far.  Whether or not that happens, the endgame continues to be a shift toward economic deceleration.  The only questions are whether we have that "aha moment" and how long the economy can support higher rates before the gig is up.

In simpler terms, as long as economic data isn't getting worse, rates will go higher--even if the pace isn't what it has been during previous Fed rate hike cycles.  My fear is that because of the sideways indecision seen at the end of 2015, when markets collectively accept the next trend, the initial move could seem abrupt relative to most of the past 2 years.

To that end, we increasingly need to see rally days if we're to avoid a disconcerting shift in technical momentum.  Unfortunately, it may already be underway, but we can reserve any serious panic for a strong jobs report this Friday.

There is no significant economic data on tap for today, so we may see some of the underlying tradeflow trends coming to the surface, unless we see a repeat of yesterday where overseas volatility was in control.