MBS CLOSE: Back To PAR Range... Now What?

Thanks to AQ's good coverage of the day, this close is mostly just charts.  Take a look at the previous post, as well as MBS MORNING.

We've faired pretty well indeed since the heartbreak of an NFP print.

With this week marking what has been the most sincere "pause" in recent equities exuberance, are we FINALLY looking at at least a correction in stocks?  Yeah, everyone SAYS stocks are overbought.  El-Arian and others were out today using phrases like "sugar-high," etc...  Everyone SAYS we have to come back down in stocks, and for the love of MBS-Gods, I BELIEVE!  Or at least I really really want to believe.  But weeks after I would have predicted a retracement in stocks, all I would have to show for it would be a ton of losses on S&P shorts taken out just over 970.  WHERE is the proof?!  Maybe it is true that the markets will always do what is contrary to the expectation of the largest amount of people. 

Stocks have made so many an intelligent pundit look stupid that when AQ and I have our back-room conversations, it is only with hesitancy that we admit to each other any thoughts that have to do with stock prices getting lower (Blasphemy!).  So, we're really not eager to go out on any limbs as to what might or might not happen in stocks.  But stocks being a key barometer of "recovery sentiment" and Tsy's being a key reflection of "Fear of recovery sentiment" and MBS taking cues from the yield curve, we unfortunately have to concern ourselves with the topic. 

Although I've been waiting for a stock correction for a few weeks now, and although I get more and more anticipatory the longer I wait and the higher stocks climb, this upcoming week feels like the best candidate so far to finally cry wolf.  Our resilience in the face of last week's NFP was about as good as we could have hoped.  Today's data, though not worthy of a "stop the presses" headline, was a potentially interesting suggestion in that we saw reversals of previously improving metrics. 

Add on to that what veterans of the blog will remember as an eye-opening discussion when we talked about tendency for bonds to rally into/during winter and fade into/during summer (vice versa for stocks).  And a couple prerequisite conditions for some predictability might be getting checked off.  And at the end of the day, predictability is really what it's all about.  We've danced around the topic of "getting back to fundamentals" today and recently.  A simpler way of looking at this would be to say that markets will move according to historically established implications of economic indicator and headline data.  Of course, tradeflows will always factor into movements, but it's not for nothing we've gone so far as to write entire grammy-award-winning rap singles about trading paradises and such...  We've been REMARKABLY disconnected from a variety of factors to which we are normally connected.

We'll use one of our saved up "get out of analysis free" cards and put off a more detailed discussion of these potentialities until Monday since few if any of you are pressed for a lock float decision at this hour on a Friday night.  But if we decide in any meaningful way to commit to these visceral leanings, we'll have the time and energy to back those claims up to much greater effect.  Until then, picture our eyes turned skyward, heads tilted, with forefinger and thumb contemplatively smoothing our travel weary stuble, thinking to ourselves "maybe, just maybe...  next week is the week!"  And indeed we hope our future travels do take us down that road of a meaningful correction for stocks, and perhaps even moreso, we hope you can join us... 

A final chart to ponder... Do you think this 10yr futures chart looks poised to start heading up again?  There are a few pertinent technicals at play...  Can you spot them?