MBS CLOSE: Month Ends With MBS Over 101-00

With treasury auctions, testing of long term ranges, stock rallies, and stock sell off's, it was quite a choppy week.  (long time no chopatility, eh?).  The story of the day was the weak stock market.  We discussed it earlier, but I'll put the chart up for you again which shows the index breaking its longest term support a few days ago, bouncing off the next support level down, returning exactly to the long term support with yesterday's rally, only to break through yesterday's support today.  Ouch...  Tongue twister there... 

The last 4 salient lows in the S&P are denoted by the white circles.  Long term primary trend in grey.  shorter term, but even more established is the secondary trend in red.  So if we just call the long term trend "grey" and the shorter term "red," we could take the tongue twister to the next level and rewrite a few sections of Dr. Suess book.  Heck, we could even change the title to Shocks In Stocks:

Grey brakes wednesday

red holds next day

grey holds same day

red breaks next day

Yes...  I'm reaching for it at this point, so let's get on with the recap and call it a week...  (maybe it's because Fox in Sox is one of my kid's favorite books...  sometimes I hear it in my head...)  Ahem...

MBS did well the 4.5 MBS rallying 13 ticks to 101-06.  This was good for a current coupon at last marking today of 4.266, the lowest point of the week.  But dropping even more in yield today than the MBS current coupon was the 10yr.  Spreads played their normal "widening into rallies" role as the yield on the benchmark dropped to 3.387. 

Yes, this is a technical level of recent discussion, and though we wouldn't want to count it out before having sufficient reason to do do, it's not as if Friday's trade has carried us to the doorstep of some significant turning point.  But 3.38 will likely continue to be interesting in the short term as it is the center of the previous range trade.  As far as MBS, there's an interesting range set to be tested between 101-06 and 101-08.  It almost looks like an inverse head and shoulders, except it's Batman's head...  So....  Even MBS dresses up for halloween.  (another stretch for comedy MG, better keep moving on...)

Important stuff in the week ahead as major questions that have been exerting a fair amount of influence over the yield curve have a certain chance to be answered, or at least illuminated a bit.  What could do such a thing you ask?  Wednesday's FOMC Announcement!

Next week is super data packed in general!  Monday kicks that off with the following:

10AM - ISM MFG Index, Construction Spending, AND Pending Home Sales

1030 AM Fed's Tarullo.

More data than most monday's and all at 10AM....