Mel's Blog

As the week begins, Mortgage Bonds remain locked below a very tough ceiling of resistance at the 25-day Moving Average.

Last week, Stock prices rocketed up to record highs, but now appear to be taking a short breather before their next move.  And with over a third of the Dow Jones companies set to report earnings this week, there could be more excitement in store.  When money is pouring into Stocks, it's generally coming out of Bonds - so if the Dow breaks the 14,000 barrier and moves higher, Bond pricing could suffer as a result. 

This week will hold a busy parade of economic reports, beginning with this morning’s New York Empire State Manufacturing Index.  Manufacturing activity in the New York region is often volatile, and July was no exception with a reading of 26.5, far hotter than expectations of 17.0 and the highest reading in just over a year.  While this was a strong economic read for the beleagured manufacturing sector, Bonds seem focused on the action in Stocks, and had little reaction to the news.  

With important reads on wholesale and retail inflation over the next couple of days by way of tomorrow's Producer Price Index (PPI) and Wednesday's Consumer Price Index (CPI), we want to cautiously Float for now, and see if these events can provide the spark to pop Bonds above tough overhead resistance at the 25-day Moving Average.  But don't float and go on vacation...the market has been very volatile of late and the full news week ahead may keep it that way.  Keep your trigger finger ready to lock, as the overall trend remains lower.