MBS AFTERNOON: Another Day, Another Range Trade

Eerily similar patterns forming in MBS this afternoon versus yesterday.  The only major difference would be the direction of the rangebound narrowing that has occurred on both days. That left us with an "unresolved triangle" yesterday, and the same technical pattern is pretty much already a given at this point, because even if prices break one of the triangle lines, it would likely not be indicative of volume without noticeable impetus from a headline.

What is this "unresolved triangle" you might ask...  Quick refresher for those who need it...

• "triangle" is a common name in Technical Analysis for a pattern of price movement
• As you might guess, the pattern is similar to a triangle, but really only needs two of the three lines that the geometric shape would have. 
• The lower line would be determined by connecting successive lows (valleys, troughs, etc...). 
• The upper line by connecting successive highs (peaks...)
• As long as these two lines are heading toward each other, you have a triangle
• Technical Analysts, though varying in approach, tend to ascribe some sort of significant to the point at which the price curve BREAKS (breakout, test, violate, etc..) through one of the lines as it inevitably must. 
• The easiest and safest way to think of that significance is simple to say "the trend of converging prices is now more likely to be over than to continue"
• In other words, no more triangle, and in keeping with other technical analysis principles, one might expect the recently broken line to now serve the opposite of it's recent purpose.  So if it had been resistance to prices going higher, for that very reason (regardless of it's inclusion in the triangle), it should be watched as support for prices moving lower. 
• That's it for now, but there are deeper corners of the triangle rabbit hole.  Let me know if your interested in more detailed breakout sessions on Techs and we'll figure something out!  Use the Comments!

So an "unresolved triangle" would simply be one where the trendlines will not be converging during the time period you are watching, such as yesterday, and probably today.  Of course, in order to remain unresolved, prices would have to continue to pinball bounce inside the trendlines.  Just because the trendlines don't meet today doesn't mean prices might not break out of the trends anyway. 

In my mind, triangles occur not only for the traditionally held reason of "competing trends" but perhaps even more germane from mid 2009 on is that we often see them emerge when the market "knows where it is going," sets a general course, and range trades to get there.  I urge you to stop for a moment and really consider the psychology behind what I'm saying. 

It's as if everyone loosely knows the direction that everyone else will all be going, and the closer they get to that approximate destination, the more their own paths both CONFIRM and even GUIDE the rest of the journey.  I'm fond of the two word phrase: "honing in" when it comes to this phenomenon. 

As far as "confirming" and "guiding," sure, having a general destination in mind is great, but unless your counterparts heading in the same direction behave predictably, you may doubt your course and deviate.  By putting in those "peaks" and "valleys" in linear paths, the various course adjustments are actually drawing a big fat arrow to the the pot of gold at the end of the rainbow, thereby GUIDING the journey. 

Wow... does this make any sense whatsoever?  Let me know either way so we can offer some more in depth background or perhaps devote less space to something you already "get" in the future.  Oh... and it should be mentioned that this whole discussion is another one of those "range bound and waiting for guidance" discussions.  As is frequently the case, the overnight lock/float will likely be most informed by tomorrow AM's data.  Nothing big though, just GDP...