MBS Live Day Ahead: Here's The Wind-Up

We talk sometimes about bonds taking a "lead-off" (like in that sport that a few of us still remember).  Well, at least I talk about bonds taking a lead-off.  In baseball, it's pretty much a given any time a runner is on base.  The only question is whether the runner maintains a constant, safe distance from the base as opposed to pushing closer and closer to the next base just before the next pitch is delivered.

That next pitch will cross the plate tomorrow afternoon following the Fed Announcement, or so we'd expect based on the absence of other big-ticket market movers as well as the behavior of the proverbial base-runner.  To be clear, bonds have been holding a steady distance away from base (let's call it 3.0% in 10yr yields).  Over the past 5 days, this lead-off range has been 3.06-3.09%.  

While we won't be saying "here's the pitch" until tomorrow, we can say "here's the wind-up" today.  Bonds are taking that opportunity to extend their lead-off in an unfriendly direction.

In the bigger picture, this is more than a serendipitous or insignificant example of weaker momentum.  This is as weak as momentum has been since the beginning of the year.  If we were to go back and break out 5-day charts at various times in early 2018, we'd see the same pattern as above.  In the longer-term chart, we can just look for groups of candlesticks that feign recovery or consolidation (marked by teal lines labeled "false bounces").

The momentum indicators serve as a warning that weakness can continue, even when it seems like we've had enough.