A Couple Rally Targets If MBS Stay in The Green

Although it's a bit too soon to tell, perhaps we're seeing the first day of bond markets officially digging in and beginning the tough, slow push back against the recent period of unimaginable pain otherwise known simply as "October."  The results of the 30yr Bond auction may help inform that eventuality to some extent, although it's a bit troublesome to be rallying into the auction.  Thankfully, 30's have a bit of a "curve concession" at the moment (they haven't rallied as much as 10's, 7's, 5's have today).  Speaking of 10's, here's the short term chart with rally targets.  The first is basically right under foot, but the next line lower is a longer term pivot near 2.12.

You can see where levels around 2.12 come into play on the longer term chart that we've been watching the past few days.  Certainly, we look to be confirming the supportive bounce under 2.23, but this same chart also lays out similar resistance in the event of a rally.  2.11 on the longer term chart, 2.12 on the chart above. 

MBS translate those rally targets to 101-06 and 101-14.  I also threw in 101-25 as that's the concrete ceiling, as well as the upwardly sloped trendline we tracked yesterday as potential longer-term support.

On a different note, the stock lever has been somewhat connected today and we get the sense that a stock breakout of their range would be bad for Treasuries and ultimately MBS.  To that end, this updated version of last night's candle chart shows another firm bounce lower off the resistance line.  More case-building for this trend-channel.