MBS Day Ahead: Bond Patterns Repeating as ECB Stays The Course

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Posted To: MBS Commentary

Corrections are one of the trading themes we frequently discuss when there is broader momentum in either direction. In its simplest form, a correction can be thought of as a short trend (2-4 days) that points in the opposite direction from prevailing longer-term momentum. If you prefer not to try to understand market jargon based on the typed word (I certainly wouldn't), today's chart makes it easy. In the chart, the only true corrections are the 2 teal lines on the right side. The leftmost line would be better characterized as a the upper boundary of a 2.5 month consolidation , and the late December line would be taken with a grain of salt in any event due to the weirdness often seen in end-of-year trading. At some point, one of these corrections will transform into a full-blown reversal…(read more)

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