Bonds Reach their Ceiling and Bounce Down

Bonds woke up angry this morning following yesterday's sell-off. A week ago, bonds began a nice rally with the formation of a Bullish Engulfing Patern. Aided by the recent slide in Stocks, Mortgage Bond prices powered through their 200-day moving average on Tuesday. But yesterday, things changed. Bond prices initially zoomed higher to break above their 25 day moving average - but the Bears pushed prices back below this ceiling, which created a Bearish Shooting Star...a reliable indicator of prices worsening ahead. Should the Bond close below its 200 day moving average, this level will now become a ceiling of resistance, with the nearest floor being found about 250bp below current levels, at the point where the rally began. We may now have seen the last of rates in the 5% range.