Market Wrap

CLOSING TECHNICAL SIGNAL: Technically – Mortgage Bonds are very oversold and they are ripe for a reversal higher. Japanese Candle charting theory also suggests that as losses get between 6 and 9 consecutive days, like we have experienced, the sell off is overextended and poised for a reversal. MARKET WRAP: Mortgage Bonds had their monthly coupon rollover after the close of trading today. The effect of this rollover was minus 31bp points for the 4% coupon. Therefore, while the Bond quote for today shows minus 112bp closing at 96.44, the minus 31bp rollover adjustment must be accounted for. This means that pricing actually closed down 81bp on the day. We will be switching over to the 4.5% coupon on Thursday. The fall today was due to continued inflation pressures and economic optimism and as money continues to move into the Stock markets. The Dow jumped 71.52 to end at 12,233.15 for its 7th straight gain and its longest winning streak in nearly 7 months. The S&P 500 Index rose 5.52 to 1,324.57 while the Nasdaq rose 13.06 to 2,797.05. Oil settled at $87.80/barrel down 64 cents. There are no economic reports tomorrow. The Treasry will sell $24B 10-yr notes tomorrow.(MMG)