Last week was a shortened week, but certainly not full of surprises, ending the week with bonds lower, rates slightly higher.  Looking back, we can clearly see bonds are faltering yet again.

The week had plenty of data to get the markets moving, but the shortened trading week brings lower volume and sometimes “mood swings.”  Chicago PMI beat expectations and oil was climbing yet again, but bonds ended the day in with a doji, basically right where they opened.  Things were looking up, given their strength despite the news.  Tuesday brought the ISM Index and bonds started their descent.  Every day, bonds ticked lower and ended the week dropping in the face of some favorable news and the picture turned ugly again.

Remember that last week was a shortened trading week so must be taken lightly.  This week’s movements will be more of a determinant in the direction bonds head, but technical factors cannot be ruled out as a picture rarely lies.

Looking at trend lines, the larger down trend remains to be broken, but the shorter up trend may remain.  In a nutshell, bonds can still go either way based on trends.  Stochastics don’t provide a clear picture as they are right in the middle.  A quick glance at the charts for the last quarter though favor lower bond pricing as the bigger picture presents a long term down trend still in play and fundamentals do not appear favorable at the moment.

This week has very little in the way of data and none of the releases this week are typically major players.  Of course, expect news headlines to sway the herds, so “mood swings” can be expected.  Here is a breakdown of what data is slated for release…

• Wednesday:  Crude Inventories (10:30)
• Thursday:  Initial Jobless Claims (8:30)
• Friday:  Balance of Trade (8:30), Consumer Sentiment (10:00)

This week will be a player in the overall trend, but data will not likely be the catalyst that sets things up.  You can expect recessionary fears to be of prime concern as the data rolls out as none really points towards the inflation spectrum.  Use caution as you move through this week, but I would start in a locking stance until bonds can show a solid movement higher.