Current Price of FNMA 6.0% Bond: $98.81, +3bp

After getting roughed up yesterday, Stocks are attempting to rebound this morning, which could lead to pressure on Bonds if a rally in Stocks gains momentum. And as has been the case, Bonds are still somewhat attached to the 25-day Moving Average, containing any upside moves. A look at the Bond page shows the Bond now being squeezed between support at the 25-day MA and resistance at the 40-day MA. The inevitable breakout direction will depend on upcoming news and Stock direction.

Speaking of Stocks, today's morning move higher was sparked again by stronger corporate earnings. Amazon and Boeing are both flying high, leading the way for Stocks. But our good friend, Bond fund “guru” and harbinger of doom, Bill Gross from Pimco, stated yesterday that he believes the Stock market is ripe for a 5-10% correction at any moment due to rising interest rates in the high-yield or junk bond arena and the meltdown in subprime mortgages. Given his track record, his comments should be taken with more than just a grain of salt.

Existing Home Sales for June were reported at 5.75 Million units, which was less than the 5.90 Million expected. But there was some good news within the report – the median home sales price increased 0.3% to $230,100 representing the first year over year price increase in 11 months. Additionally, the monthly sales inventory dropped to a level of 8.8 months from the prior month’s reading of 8.9 months. All in all the report suggests the housing market is stabilizing and isn’t as dismal as the media portrays.

At 1pm ET, the US Treasury is auctioning off $18 Billion in two-year Notes and this added Bond supply could weigh on the overall Bond market later today. Then at 2:00pm ET, the Federal Reserve will release its Beige Book - the Fed's survey of subjective views on the economy. There shouldn't be any surprises in this report as the Fed's views are widely known at this point, but you never know how the Bond market may react in this overly sensitive environment we are presently in.

Bonds continues to walk the tightrope along the 25-day Moving Average, and we will float so long as Bonds can keep this level underfoot.