"THIS LAND IS YOUR LAND, THIS LAND IS MY LAND" and as the Presidential opponents continued to "jib-jab" at each other this week, Mortgage Bonds seemed to be unsure what land to call their own. Fed Chairman Alan Greenspan gave his semi-annual Congressional testimony last week, and his overwhelmingly bullish take on the US economy was somewhat of a surprise. Big Al even went as far as saying that the economic slow down over the past month or so, which has helped home loan rates decline slightly, is likely very temporary. These words spooked the Bond market into a late session swoon last Tuesday, and home loan rates worsened by about .125% across the board.

But later in the week, Mortgage Bonds were struggling hard to regain some lost ground. Helping to support Bond prices moving slightly higher was the pattern of Bond buying into the weekend that has been seen over the past month. Why is this happening? Since no economic or financial news can surface over the weekend, the only news that can come is geopolitical. Especially with the Democratic Convention convening in Boston, Traders moved to Bonds as a protection against any unfavorable geopolitical news that may surface, which helped Bonds recoup some of the territory lost earlier in the week.

THINK WWW.JIBJAB.COM IS FUNNY? NOW IMAGINE YOURSELF WEARING BIG BOOTS WITH SPRINGS ON THE BOTTOM, AND A HARDHAT WITH A HUGE SPRING ON THE TOP?AN AMUSING VISUAL?YET IT HAS EVERYTHING TO DO WITH UNDERSTANDING HOW MORTGAGE BONDS AND HOME LOAN RATES MOVE ON A TECHNICAL LEVEL. DON'T MISS THIS WEEKS REVEALING MORTGAGE MARKET VIEW.

The week ahead is loaded with economic data for Traders to absorb, as every single day this week will bring a report of moderate to high impact on home loan rates. On a technical level, Bonds managed to work up enough steam to close out last week just above the 100-day Moving Average?but can this floor of support hold? Bonds haven't been trading in a very convincingly strong manner. If the economic news of the week echoes Chairman Greenspan's positive comments on the US economy, Bonds may easily be knocked around and pressured lower, and lose their tentative toehold on the 100-day Moving Average.

Bottom Line: The amount of economic news this week spells a real wild card for home loan rates?but in the absence of big surprises, rates will likely be stable throughout the week.

Floors of support, ceilings of resistance?and funny boots with big springs? Here's the straight scoop on how Bonds trade on a technical level and what it all means for home loan rates.

So what exactly does a "floor of support" mean anyways? Take a quick look at the chart above. The colored lines show the "Moving Averages", indicating the average price of the Bond for the past "X" number of days. Below you can see the 100-day Moving Average shown in orange, the 200-day Moving Average shown in blue, and the 25-day Moving Average shown in green. On a technical basis, Bonds will trade between various Moving Average levels. The lower Moving Average acts as a "floor of support" that can be tough for the Bond to break below, while the upper Moving Average acts as a "ceiling of resistance" which can be difficult for the Bond to break above. The longer the term of the average, the more difficult it can be for the Bond to break through?in other words, the 200-day can be tougher to break through than the 100-day.

And what causes a "breakout" above or below a ceiling or floor? Market momentum.

Imagine that you are standing on the fifth floor of a ten-story building, wearing boots with big springs on the bottom, and a hardhat with a big spring on the top. Yep, you're looking good. Now imagine that you start to jump up and down really hard. With enough momentum, you would eventually break right through the ceiling above, which would then become your new floor?or break through the floor beneath, which would then become your new ceiling.

Remember that positive news for the economy is usually bad for the price of Bonds because of inflationary fears. So good economic news causes Bond prices to be pressured lower, and may cause them to break through a floor of support. If a floor is broken through, it becomes the new ceiling of resistance. Negative economic news is generally good for Bonds, and causes prices to move higher towards a ceiling of resistance. A break through a ceiling causes it to become the new floor.

When Bond prices are moving higher, home loan rates are going lower. When Bonds are pressured lower, home loan rates are rising. Now look back at the chart above. With such a loaded news week, we now know that if the news this week is positive in nature, indicating continuing strength in the US economy, Bonds could falter and lose their tentative toehold on the 100-day Moving Average, causing home loan rates to increase. If this week's news is negative for the economy, Bonds could gain momentum and begin to move closer to the 200-day Moving Average, which would cause home loan rates to improve.

Finally - the economic report calendar breaks out this week with a dozen releases. Today and tomorrow, Traders will get to view the latest Existing and New Home Sales figures along with a reading of Consumer Confidence. The highest impact reports of the week will be Thursday's quarterly Employment Cost Index coupled with the latest weekly Initial Jobless Claims, followed by Friday's important Chicago Purchasing Managers Index (PMI) Report.

Remember, as a general rule, weaker than expected economic data is good for rates, while positive data causes rates to rise.

For the week of July 26 ? July 30, 2004