Mel's Blog

Mortgage Bonds are drifting lower after failing to break above resistance at the 100-day Moving Average late last week.  The high volatility continues and the recent sharp drop illustrates why it is prudent to be overly cautious, which means sometimes sacrificing small potential upside gains to protect against the large losses that others have been subject to.

Existing Home Sales for January is the only economic report set for release today.  The market is expecting a reading of 4.80 Million, down slightly from last December’s sales of 4.89 Million.   The report could shake the markets if it wildly misses expectations.

Some Fed speak today as both Fed Governor and FOMC voting members Randall "The Wolf" Kroszner and Frederic "Fast Freddy" Mishkin talk later today.  Mr. Mishkin's speech, at 3:30pm ET, will likely catch the eyes and ears of the market as the topic is "Stabilizing Inflation".  The market has reacted rather negatively to Richard "Loose Lips" Fisher's remarks on inflation as of late, so we will be watching for a potential market reaction later today.

The Bond is trading in a wide 115bp range between a ceiling of resistance at the 100-day MA and a floor of support at the 200-day MA.  It appears as though prices are destined to retest support at the 200-day MA, presently 66bp beneath present levels.