In yesterday morning's article, we discussed the recent consolidation of 10yr Treasury yields in the context of "Flag/Pennant" formations (Read It HERE).  When considering the breaking and crossing of any given technical indicator, we often include the stipulations that the breaks be confirmed.  While this can mean different things to different people, it's generally fair to assume that the break past a trend should:

A) Be maintained for at least one additional time period according to the charts interval (preferably more).  This means that if we're looking at an hourly chart, that we'd want to see another hour of trading occur on the other side of the line in addition to the portion of the hour in which the break occurred.  Think of this like a weightlifting competition...  It's not enough to merely lift the weight up, but it has to be held for a certain amount of time.

and

B) Preferably occur with equal or greater volume than the trading that immediately preceded it.  In other words, if a big spike in volume and volatility carries prices or yields to the edge of a trendline but doesn't break them through, and then prices/yields simply leak over to the other side of the trendline in late day, light volume, we'd tend to not consider this  a breakout.

Here's yesterday morning's chart:

8/21/12

and here's the same trendlines on today's chart:

8/22/12

As you can see, we definitely began testing a breakout on the high side earlier in the session, but soon fell back inside the triangle/pennant/flag (and herein lies another nuance of determining the actual breakout: if the triangle was broken, we'd simply have moved to assess a horizontal range break with an upper line parallel to the existing lower line.  In that case, it would have been a true flag pattern as opposed to the pennant, or triangle seen in the chart).  Bottom line here is that this was a test, but ultimately one that failed to confirm.

That's probably for the best as yesterday's trading environment didn't really offer enough new information for the market technicians and market fundamentalists to get on the same page without questioning one another.  It's not that there are dueling groups of traders with diametrically opposed viewpoints on analyzing markets, but rather two ends of an analytical spectrum.  We like to find balance and consensus among them when possible and it's hard to do that if there are no fundamentals (data, events, news) to back up the technicals (price/yield/volume movements in and of themselves).

Today's line-up brings fundamental market movers to the table that yesterday lacked.  There is, of course, the Existing Home Sales data in the morning, but that would have to be pretty wild in order to motivate a major move.  A better bet would be either the European headlines that could be generated out of the Eurogroup's visit to Greece as well as the afternoon release of the FOMC Minutes from the latest policy-setting meeting.