In case you missed it (some of us wish we would have), it was an ugly day.  4.0's were down nearly a full point to 97-18.  4.5s were off 22 ticks to 100-18.  Meanwhile, the 10yr tsy lost more than a point to end at a yield of 3.678.  All of this occurred against a medium low day of volume that saw stocks push back in line with annual closing highs.  But data was at a minimum.  The most important events of the year are behind us, and it leaves us to wonder if we're seeing a classically choppy year end trading session or if the huge moves and only marginally lower-than-average volume are indicative of a broader shift in sentiment.  Well, not really, but those are the only two contenders and it wouldn't be very interesting to just mention one.

All across the board, we were weaker to open, weaker when stocks opened and weaker through the day.

If you're wondering where this puts us in a long term perspective, you'd not be alone.  Logically then, we'll show you. 4.5's HAVE NOT yet reached the lows of september and October as you can see the red horizontal line marking today's close lies somewhat above those levels.  We stand a chance to catch some support from a potential internal trendline connecting back to summer highs, but we may indeed test those early fall lows.

The picture is a bit bleaker in tsy's,

Any yield levels from September look to be a faded memory as the nearest historical reference points lie in the summer months.  Before spiking in early august, and also right AFTER spiking, the 10yr caught some support at yields only marginally higher than today's highs. If we broke through those tomorrow morning, and volume was the same or better, we'd have another chip in the pile of "funamental change in trend."

But until that becomes likely at all, it's not at all likely.  This isn't a "FLOAT EVERYTHING" recommendation by any means, but to whatever extent we continue to ascribe to the "play the range until the range plays you" motif, we'd be remiss if we didn't call attention to said ranges.  Remember, if one range breaks down, only THAT range is broken.  So we look then for any other evidence of the range or other meaningful technical levels to see where we might "get played" again.

That's going to require some more altitude this time, but it may be worth it.

So in this context, the market is putting the trend in tsy's the the ultimate test as to whether or not it will remain in a classifiable DOWN-TREND  (in yield) from q208 highs, or whether it's bold enough to challenge the highs from the summer.  Because REMEMBER, UNLESS TSY YIELDS BREAK THEIR SUMMER HIGHS, THE LONG TERM TREND IS STILL ONE OF IMPROVEMENT.  We don't like seeing the longer term trends this close to being tested any more than you, but it is what it is.  (And it's still a downtrend).

Stocks, despite finishing in line with annual highs, actually play the wing-man quite well here.  We can see in the one day chart, that on an almost data-less day, tsy's did seem to be taking some cues from stocks.  Note the various pairs of arrows that are intended to show how stocks made a move and tsy's mimicked the move to some extent in shape and severity.

This is something we've been pointing out as the year grinds to a close, and today is a bit more circumstantial evidence that bonds-especially in the absence of data--are sensitive to stocks treatment of their annual highs.  This is more something for you to ponder by the fire than to paste to an email and explain the underpinnings of the market to everyone you know.  More of a curiosity to be watched for continued validity.  The real story in stocks is that, despite rising to the very limits of their recent range, they are still within those limits.

So now we have both major sides of the market showing signs of a range trade over longer terms in that they've come right to the brink of significance, but have not broken through.  Could they tomorrow?  Sure, why not... But they could just as likely edify those ranges and wait until the new year to make more meaningful movements.  With that in mind, it's never fun to lock with losses.  Hopefully that experience is limited for you by our incessant nagging to lock with gains recently, but no matter where you are, that's where you'll be, and the question remains, what to do?

At this point, we'll stick with the blanket that has kept us warm all winter... Until various prices and/or yields move with significance OUTSIDE the range, continue to use the range to set entry and exit points.  And though it may not be the same, lower, more narrow range in tsy yields that we've recently had the pleasure of knowing, it's still a range, until it's not any more.

Data picks up significantly tomorrow and whereas price movements were the most significant event of the day, we actually have EVENTS tomorrow.

- q3 GDP, corporate profits,  at 830am

- existing home sales at 10am

- FHFA home price index at 10am

And the econ calendar just gets thicker as the Thursday dressed like a Friday approaches.