After Thursday and Friday of last week mimicked the previous Thursday and Friday, it was fair to wonder if we'd get another ugly Monday today.  While we did lose ground in terms of trading levels, the severity of the weakness reveals several clues about trader sentiment.  Those clues point to an ongoing consolidation of the late-April / early-May sell-off.

Let's talk quickly about this term "consolidation."  Quite simply, it can be thought of as a period of time where trading levels are moving sideways or counter to the previous trend.  The days inside the consolidation can be volatile and varied.  The key feature is that it is neither extending the previous trend nor beginning a bounce back in the other direction.

So far, we're still in the midst of a consolidation.  We clearly aren't yet bouncing back from recent weakness, but neither are we stampeding toward the years worst levels. 

With a lack of volume and a big glut of corporate bond issuance, today's weakness may prove to be deceptive in terms of the amount of ground covered.  When bonds are as illiquid as they have been, unexpectedly high supply combined with low trading volumes makes for amplified movement.  And even then, trading levels remained in better shape than the first three days of last week.  This is a far cry from last Monday which closed at the highest yields of the year.