After continuing their downward trend on the day after the 10yr auction, stocks finally found support at the lower end of their month-long trading range at 1087.  In the afternoon, we suggested that if this indeed proved to be the case, that tsy's would have a hard time breaking through their resistance at 3.42.  So much for the thrill of the unexpected... 

We'll start with the S&P chart to revisit the intense regularity of a range that has lasted over a month now, and has been by far and away, the hardest overhead resistance for the stock rally.  But even as stocks struggle with the notion of and S&P over 1110.00, the bulls haven't been willing to concede anything below 1087.  I haven't seen waves this regular since I passed out in the MBS Ninja's trunk the night before his bi-monthly family vacation, and woke up in the wave pool at Typhoon Lagoon.

The bounce at 1087 was all the cue that tsy's needed to have a bounce of their own. 

Indeed, what else is a 10yr yield to do when approaching 3.42 these days!?  It needs enough gusto to break decidedly through, or it will simply be enough bounce.  The turn of events today implies two things: one, which we already know, is the persistence of the technical trading levels within a range.  No surprise there.  But the other is a bit more subjective...  Sure there wasn't any meaningful data after the auction, so we might well expect this, but it suggests that tsy's may be paying close attention to this range in stocks. 

There's no denying the momentum in the equities market, and I'm sure it would be a meaningful even for the S&P to significantly break that 1087 level to the downside.  It looked as though tsy's were ready to capitalize on such an occurrence by toeing the line at 3.42, but once stocks caught the bid tsy's held off.  Just a thought, and something for all of us to watch to see how it might play out.

MBS did a bit of range-holding as well...  Basically we're looking at a range that was fairly well established before Dubai-Drama around 101-26.  Even after the drama subsided, we didn't land firmly back in this range without a bit of "aftershock." as noted in the encircled portion of the chart below. 

And so it is that we've arrived at one of our two post-10yr-auction eventualities: waiting on the 30yr Auction/Shoe to drop to either confirm the range or suggest a test in one direction or the other.  It's not the only data item on the calendar and it's not the end of the week--we also get jobless claims, international trade, Geither and Duke speaking, tsy budget, and fed balance sheet--but it remains the best candidate for big movement on the day.  If the range holds, we're on to Friday with Consumer sentiment, retail sales, business inventories, and import/export prices.