MBS CLOSE: One Quarter Point From ALL TIME Highs

I was both happy and sad upon my nightly review of the most recent blog post.  I like to read it even if I've written it, to assess what else might be needed on the day...  I was sad to see there's not much left to discuss and I know that you'll all be sad to see me type less, but I was happy that AQ related the content exactly as I would, and that my Thanksgiving break could start that much earlier as I'd likely be able to finish up early.  So if you haven't read MBS Afternoon, do it.

That said, I'll just give whoever is interested a quick run down of my charts for the evening.  Certainly some epic things happening, but plenty of counterpoints as well.  Aren't there always?!

2 Day 4.5 MBS

Other than the fact MBS closed at another multi-month high (albeit by a scant 2 ticks), there's not much else to say.  Prices did not reach their intraday highs from earlier in the year, nor did they exhibit any ridiculously pertinent technicals

2 Day 10yr Tsy Yields

As opposed to MBS, plenty of ridiculously pertinent technicals.  First we see 3.3 as resistance yesterday and turn into support after the breakout.  Same thing happens with 3.28 which is significant because it is the only resistance yields encountered at the end of september before moving into the teens.  We'll highlight that microscopic "ledge" on the next chart.  That is happened was cool, but that it happened without much volume greatly diminishes the significance and suggest something more serendipitous.

Long Term MBS and Tsy Yields (Inverted)

It would be nice if it "meant something" that MBS seem to be creating a linear trend channel in a positive direction (top yellow arrow), but the benchmark indication from the 10yr begs to differ...  There, we haven't improved past the best levels from late september and early October.  So remembering, as we're wont to do, that spreads will not perpetually tighten, it might behoove you to pay equal if not greater attention to tsy's in times like this for suggestions about longer term trends in the rate market.  If spreads turn out to hold under 80bps forever and ever, that should prove to be a pleasant surprise for you, but in the more likely event that spreads widen a bit with the fed exit, you won't miss a step when MBS prices reconnect their comparative peaks and valleys with tsys.  Oh yeah AND the lower yellow line forms a major triangle with 3.30...

5 Day S and P

Quite the wallflower today as stocks timidly toed the other side of the 1110.  But they did this so timidly that that the 18th's closing prices, the 23rds mid day resistance and today's close might as well be exactly the same.

Long Term 10yr Tsy Futures

Tsy's are currently testing the long term resistance at 119-29.  So far, it's a successful breakout with prices marked at 120-16 at the moment.  But in moving above the 119-29, prices entered a bid of a "no man's land" that can go either way in terms of support and resistance.  In fact, during the meteoric rise at the end of last year, the only hitch in the pattern hit both the limits of this range like a pinball bouncing quickly back and then forward again, before moving without further incident to all time highs.  All that to say that the breakage of 119-29 doesn't indicate we're going straight to the moon... (it doesn't NOT indicate that either, but things don't get uber-bullish until the upwardly sloped red line is broken in addition to the higher of the two dotted yellow lines.

On a final note, today's retest of the 119-29 got a HUGE vote of support with combined volume from the two most heavily traded futures contracts reaching almost TWO MILLION!  (1.26 in front and "off the run" ramping up with 666k).  For a day before Thanksgiving, this is earth-shatteringly catastrophically immense volume.  It's even extra ridiculously insane volume for a full 5 day week.  It's a shipload of volume folks... 

So does the volume constitute a vote for improved prices?  Or did prices improve organically and the volume constitutes the Stop Sign preventing prices from moving higher?  I don't know... But it's fun to think about...  I know what I'll be doing this Thanksgiving!  And speaking of that, I'll be raising a glass to YOU tomorrow because I know I speak for AQ as well when I say that we're both thankful for our audience...  After all, if we write about MBS falling in the woods, but you're not there to read about it, does it really fall?  Well yes, yes it still falls, except you get squished since you didn't know about it...  So the two way street is good all around...  Happy Holidays!

p.s. the chart below doesn't show the "off the run" volume, just the December delivery.