Mortgage Bonds are trying to bounce higher this morning, but prices will have to contend with a strong ceiling of resistance at the 200-day Moving Average, just above present levels.

Wachovia Corp.'s CEO, Kennedy Thompson, was removed by the Board of Directors effective immediately, after sub-prime losses cost the lender more than half of its stock value in the past year. Bank stocks in the U.K. are selling off as lender Bradford & Bingley issued a profit warning. As a result of this morning's news, financial stocks are leading the stock market lower and giving a slight boost to Mortgage Bonds.

The ISM Index came in at 49.6, are reading below 50 signal contraction in the economy. Home Bonds are up 44 basis points. Slightly above the 200 day moving average, hence Bonds are up.

Even though prices are slightly higher, we have to be mindful of the high volatility and tough ceiling of resistance at the 200-day Moving Average. Our bias continues to be a locking one, with the 200-day MA just overhead.