Current Price of FNMA 6.0% Bond: $100.09, +12bp

“I hear you knocking…but you can’t come in”. Presently, Bond prices are knocking at the door of a powerful ceiling of resistance at the 200-day Moving Average. And if history is any indication, Bond prices will be turned away and pushed lower once the 200-day MA is hit. Traders will have to stop hiding under their hats and stop denying that the 200-day MA looks bad…it will be very tough to break, since it has only been crossed twice during the past year, and only three times in over two years.

Existing Home Sales during July were reported at 5.75 Million units which was essentially in line with expectations. The median home price fell just 0.6% to $228,900. The inventory of unsold homes rose to a level of 9.6 months. Overall, the report was not bad with the exception of the spike in inventory, which is a little concerning. We will be monitoring next month’s report to see if the liquidity crunch, which began last month, affects home purchases in August.

This week does offer some high impact economic reports which could influence pricing, including tomorrow's Consumer Confidence, second-quarter GDP on Thursday and the big enchilada for the week on Friday, the Core Personal Consumption Expenditure index (PCE), the Fed's favorite measure of consumer inflation. And it is likely that the PCE and next weeks Jobs Report will be the final deciding factors as to the Fed’s decision on cutting rates at the September 18th meeting.

Bonds are overbought and trading just below a tough ceiling of resistance. For now we are floating, but with a finger on the trigger to lock once the expected pushback from the 200-day Moving Average begins.

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