MBS Week Ahead: Light Data, Glimmer of Hope, and a Word of Caution


Posted To: MBS Commentary

Don't get too excited. Despite a few close calls and false alarms, bonds managed to close below last Tuesday's highs for three days in a row. Now they begin the 4th day in slightly stronger territory. To an optimist's eye, the bond market is building a case for a ceiling bounce. One way to approach such potential bounces is to consider the implication of technical analysis. One of the more mainstream technicals for this purpose is the Bollinger Band study. It consists of 3 lines. The middle is typically set at a 21-day exponential moving average (or a 20-day simple moving average), with the outer bands typically set 2x standard deviations higher and lower. This results in a moving range that ends up encapsulating most of the trading that takes place in any given security. That's…(read more)

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