Today's economic/event calendar is limited to the recently unimportant and uninspiring trade gap data, so let's talk about the stock lever and long term trading range battles instead!

"Stock lever" is our own in-house term for the phenomenon of stock prices and bond yields moving in the same direction (it's only really a 'lever' when thought of as 'price vs price' because as the price of one goes down, the other would go up).  Whatever you call it, the concept is perhaps too prevalent and too widely-regarded as something that should generally be happening in financial markets.

In other words, the notion that bond yields rise when stocks rise borders on conventional wisdom, but it probably shouldn't.  The tricky part about the stock lever is that it can look so darn connected over the short term, and frequently so!  It can even look connected over the longer run, but in general, the longer the time frame, the greater the potential disconnect.

The most interesting thing about the stock lever is the fact that it is altogether worthless over the super long term.  See the next chart with the Dow and the 10yr going back to the 70's. 

All that to say that near term bond market prospects are not necessarily tied to the potential stock sell-off that folks have been talking about for weeks and months.  That leaves the burning question of "what's it going to take to break the recent range?" 

The European impact can't be ignored.  We've observed European markets dragging US rates down time and again.  Indeed, the year's most profound turning point was the springtime buzz and early summertime implementation of European easing measures and rate cuts.  So perhaps the better question is "was endet das?"  Because unless Germany finally breaks convincingly through the low end of their range, it will be a lot harder for Treasuries to break theirs (fortunately, this is anything but ruled out based on the current shape of European bond yields).