New week, same story. Given that last week was the second worse move (higher yields) in the last 20 years, it is no surprise that we have yet to make a bottom. While bond traders were all palms out (sellers), it’s hard to trace where the money went as the Dow gains were minimal and Gold lost 2%. The trigger was President Obama’s compromise with the GOP to extend the Bush tax cuts, extend unemployment benefits, provide a 2% payroll cut, and provide favorable business expense deductions. Looking back since the announcement of QE2, a number of yield raising “hints” were put in our path. Number one has been continued improvement in the economic data. Although volatile, the net effect has painted a positive outlook for the economy. Next is the political climate, which at worst case is grid lock. Grid lock is better that outright steam rolling by the Dem’s, yet in Clinton-esk fashion, the President when over the top to compromise for the tax extensions. European debt issues are still on the table but Ireland did accept a bailout for the ECB, just another reason to feel “economically optimistic”. Adding fuel to the fire is that better economic news, added to the approximate cost of the tax compromise (850 billion) will lead to higher inflation. China failed to raise rates this morning, even though inflation is evident in their economy. Just another reason to sell. The flip side of this is that our housing market will slow from already low levels which could lead to another slowdown in consumer spending. It is all about perception and that my friends is the economy will get better, and soon. We shall see. Until we find a bottom, there are two things to keep in mind. Bear markets are frustrating and can simply wear you out. Next is that the move to higher yields in bear market trends always go further than you think. The market will turn when the last person sells. Predicting a bottom is one of the toughest calls in trading. We can only tell you that we are once again at critical levels, the 62% retracement from the April low to the October high (yield of 3.37%). “If” this is the bottom, we would expect at least a retest of 3.25% or possible 3.125% on the 10 year note. “If” this is not the bottom, the next target will be 3.625%. Let’s not even talk about that. For now, keep a positive attitude and a defensive mind set with your pipeline. Tell those that missed the bus that it has departed the terminal but will return to a better level, just not the historic lows. Lots of data this week (starting tomorrow) and a FOMC meeting to boot. Buckle up and grab you’re rabbits foot!