Hey there!

Looks like rates will continue to rise in the short term. We are seeing some hot earning reports such as from intel last night (almost double expected) and others posting better than expected earnings.

The manufacturing index released this morning is showing that orders for June are BETTER than they have been for a year...and much better than expected by the markets. (Remember: it is really about better or worse than "expected" here. Markets react somewhat to "expectations" and then when the real "news" comes out...they react to the difference if there is one.)

Oil is Up...over 60 bucks right now.

The inflation index came out this morning showing consumer pricing is UP more than expected. Generally inflation smells bad for stocks and bonds...

The better than expected earnings though is propping up stocks...and the smell of inflation is sending money into commodities and TIPS. (Commodities and "TIPS" are inflation protected.)

Concept: Moving averages. When we look at "moving averages" like the 25, 50 or even 200 day "average price" of a bond like the FNMA 4.5%: those "averages" provide a "floor of support" when we are trading above them...and a "ceiling of resistance" when current prices are below them. The interesting thing: when we "break ABOVE the moving averages: they go from being a "ceiling of resistance" to a "floor of support."

This morning we broke below the "floor of support" at the 25 AND the 200 day moving average for the FNMA 4.5% bond. We are over 100 bps lower in pricing than when we started the week...and rates will likely get worse today and tomorrow. Remember that when we break below a floor of support...that becomes a ceiling of resistance for the pricing.

FNMA 4.5% is off about 56 bps and is trading at $99.28 currently with about 2.5 hours of trading left on the session.

Dow is UP 206 points.

Have a great day!

Chad

Money is moving into the stock market and other commodities.