Bonds Recover After 2-Year Note Auction. Market in Autopilot Mode
There's low volume and there's low volume. Add in snowstorms, a lack of data, and a holiday environment....and volume was barely noticeable. What was noticeable was the somewhat mechanical structure that emerged on the charts by the end of the day though. Indicating either an expected "auto-pilot-mode" in the absence of personel, or algorythm types taking advantage of cheapness created by AM losses (just whiting for that profit to be booked)
The chart below illustrates orderly technical movements within a trend channel followed by a rapid breakdown of that trend channel.
But if we zoom out to a longer term perspective, we notice the broader trend channel being navigated today
Net effect in MBS was a stable and moderately paced rally that took FNCL 4.5's just over 102-00
4.0's also touched their post-10am highs from Thursday but couldn't crack into the richer prices seen between 8AM and 10AM, making this (like 102-00 in 4.5's) an inflection point to watch in the coming days.
As you can see by comparing this dashboard shot to the previous post, the post-auction rally basically recovered the Thursday afternoon drift that pushed MBS prices lower (bid wanted. lack of liquidity) Of the two popular colors of the season, green is indeed my favorite, especially as it relates to MBS charts. Whether or not green turns to red in the coming days will depend on whether or not a few more voices are present in the marketplace in the days ahead to digest a few economic reports. Without an improvement in attendance we'd expect to see more random meandering about a defined yet wide range. Call it an exploratory "poking and prodding" of key technical inflection levels.