Monday 6/15/2009

Mortgage Bonds are advancing higher so far today after two days of healthy gains.
The Bullish Engulfing Pattern, along with the Positive Stochastic Crossover,
accurately signaled this very welcomed rally. And the good news is that there
should be some more room to advance until we reach resistance at the 200-day
Moving Average, about 30bp higher. From there we will have to see if the rally has
the power to break above the ceiling. A stumble from stocks will be key - and
stocks continue to battle their own 200-day MA, now at 944 on the S&P 500.
As you know, we have been watching this level closely and stocks have, very
stubbornly, hung in for quite at while near this ceiling. It's no coincidence that both
stocks and bonds are doing battle with their 200-day MA's at the same time. It will
be interesting to watch.
A worse than expected New York State manufacturing index came in at -9.41,
weaker than estimates of -5.10. Readings below zero show contraction in
manufacturing.
This morning, the US Dollar is rebounding higher against global currencies. This is
causing a sell-off in oil and putting downward pressure on Stocks in shares energy,
mining and other natural resource companies.
There are no auctions this week other than the normal T-Bill offerings and the
absence of additional supply may provide Bonds some room for improvement. For
today, we can recommend a floating bias but stay tuned, as both stocks and bonds
"duke it out" near their respective 200-day Moving Averages.