The trading channel wins again!

Yesterday, MBS traded above our trading channel...only to be hammered -41BPS from theirhighs to close back within our channel.

Today, MBS traded below our trading channel....only to rally +13BPS to trade back within ourchannel (as of press time 3:28EDT):

MBS started the day up +22BPS on a slightly weaker than expected Weekly Initial JoblessClaims (340K vs est of 339K), MBS were limited though as our ceiling of resistance but a capon any real gains.

At 9:45EDT we got the Chicago Purchasing Manager's Index (PMI) and it came in at a blockbusterrate of 65.9 which is ridiculously high given that a reading of 50 shows manufacturingexpansion. The market was expecting 55.00, this was negative for bonds because it showsstrong manufacturing and economic expansion. As a result, MBS sold off -35BPS and brokebelow our floor of support located at the bottom of our trading channel.The end result is that MBS just logged our seventh straight day of trading in the exact sametrading channel.....the very definition of moving sideways.