Important Gains Must Hold - Housing Starts Worse than Expected

Today we are up in coupon about 7 ticks, which means better rates, however as we saw yesterday gains can quickly turn into losses should the market dictate. Today's trading will most likely take the lead of the stock market. The DOW is currently trading around 10,360... down about 45.00 dollars; the S&P is currently 1,110 down about 5 bucks. The reason I bring this to your attention. If there is support for the S&P at 1,110 and the sell of does not continue in the short term markets, we may see a return to these markets (from long term markets) which would lead to a sell off and higher rates. The story is the same for the DOW which is and currently has been hovering around 10,000.

And then of course we have the treasury market, which is showing a lower yield this morning, which is helping our market. The underlying news that appears to be guiding the markets right now is the worse than expected housing starts report from Reuters this morning.

08:30 16Jun10 RTRS-US MAY HOUSING STARTS -10.0 PCT VS APRIL +3.9 PCT (PREV +5.8 PCT)
08:30 16Jun10 RTRS-US MAY HOUSING STARTS 593,000 UNIT RATE (CONSENSUS 650,000) VS APRIL 659,000 (PREV 672,000)
08:30 16Jun10 RTRS-US MAY HOUSING PERMITS -5.9 PCT VS APRIL -10.9 PCT (PREV -10.9 PCT)
08:30 16Jun10 RTRS-US MAY PERMITS 574,000 UNIT RATE (CONSENSUS 630,000) VS APRIL 610,000 (PREV 610,000)
08:30 16Jun10 RTRS-US MAY HOUSING COMPLETIONS -7.4 PCT TO 687,000 UNIT RATE VS APRIL 742,000
08:30 16Jun10 RTRS-US MAY HOUSING STARTS DROP LARGEST SINCE MARCH 2009, RATE LOWEST SINCE DEC 2009
08:30 16Jun10 RTRS-US MAY HOUSING PERMITS RATE LOWEST SINCE MAY 2009
08:30 16Jun10 RTRS-US MAY SINGLE-FAMILY HOUSING STARTS -17.2 PCT, LARGEST DECLINE SINCE JAN 1991
08:30 16Jun10 RTRS-TABLE-U.S. May housing starts fell 10.0 pct

I will let you digest these figures and draw your own conclusion about how this effects our markets moving forward. I will say this is one of the reason the short term markets are selling off today, and why we are seeing gains.

Even so, the gains we have posted today fall in line with the projected green trend line outlined yesterday. See previous post... We really need to break out of this trend and establish a new line of support. I hope that the circled area represents such support, but it is way too early to tell, especially considering how closing this mimics the treasury yield down below.

Comments welcome.