Good Wednesday AM (on this best day of the week),
Bonds continue to march forward and today is a key day on charts. The MBS has already broken above a long term down trend. As of this morning it has also risen above the 10 day and 21 day moving averages. The 21 day average is important and a lot of trading decisions based on whether price breaks above or below that line. We must close above this line for this to matter. The last challenge now is for treasuries, which have also broken the trendline and risen above two of the key moving averages, now must break above the current resistance level. To be clear, first we needed to break above the downward trendline, which we have done, but we have not broken above resistance (1.62% is that line, currently at 1.65%). The MBS has accomplished this, but needs to close above the resistance line. Normally we float at the top of the range and lock at the bottom. Today, I would carefully float. If we leak into the close and we did not breakout, we will likely come down and retest the recent lows. At this moment, I think we may see a favorable close, but we do have the Fed minutes coming later today and they could reveal something unfriendly to bonds. The current waters look smooth but we do not know what lies ahead, so stay careful!
Now that the waters are in some sense clear in the Suez Canal, here was an interesting analysis of the damage done to commerce:
Please remain safe and healthy, make today great!