Here's the intraday triangle. Not much to say about triangles from a technical perspective except that in this case, the fact that it broke out on the downside is a negative indicator.
The reasons for this are severalfold, but two of them stand out: First, stocks have rallied a bit off their lows earlier this morning. Second, much of the strength in bonds recently has been due to inflation expectations moderating. those expectations have been moderating because of rapidly dropping commodity prices, and were in spite of actual inflation-related reports showing higher inflation. Traders assumed that the CPI, PPI, etc... were lagging indicators that were artificially high due to the recent commodity spike.
Now that oil has move back up over 120 / barrel and commodities have rallied, the market is surely second guessing itself for jumping to the conclusion that inflation was beaten. Once the commodity prices started to rise, this became much more of an emotional move in my opinion. In other words, there are no supply and demand issues that are causing this big of a move in oil. It is technical, and emotional. We're establishing a new range of oil now that we can see such a dramatic demand curtailment at higher prices.
So we knew today would probably be in the red. Even better is the fact that it is not in the red owing to event risk. So we are still in great shape if you think the emotional panic reaction to rising oil prices and all of the interconnectedness concomitant, will give way to decreasing oil prices over the next few days, which should again provide that nominal environment for MBS to take their stand in its current trading range.
Right now, 6.0's are still at 100-16.