Stocks Play Coy While Bonds Go Wild

"It's a very tough market to figure," said Tim Heekin, director of trading at Thomas Weisel Partners in San Francisco. "We're totally range bound between roughly [S&P] 970 and 1000 and we've been waiting to see which way we break."

The trader cited a "wrestling match" over whether corporate guidance is "strong enough to warrant a further leg up" and "whether valuations after this run-up can be maintained" as key factors in the market's directionless action.

Asked to speculate on how the trading range will be resolved, Heekin leaned toward a more cautious conclusion. "I'm preferring to sell into any lifts because [relative strength indicators] are starting to erode a bit," he said. "That's telling me the next move is probably to the downside before further upside."

Still, he doesn't foresee imminent upheaval for shares, suggesting the trading-range environment will probably last through summertime.

Bonds Suddenly Not So Sleepy

Clearly a major wild card in any scenario regarding stocks is the ongoing upheaval in the bond market. Since its low of 3.11% on June 13, the yield on the 10-year note has now risen 133 basis points, or a whopping 42.8%. That'd be a big move in a short time for stocks; for bonds, it's a lifetime of movement packed into a nanosecond and its fastest selloff since spring 1987.

"This is just incredible what's going on in the bond market," said Jim Bianco, president of Bianco Research in Chicago.

After initially rallying off the consumer confidence data, bonds swooned amid ongoing concerns about the burgeoning supply of Treasuries. The 30-year futures fell from an intraday high of 109 5/32 to 106 16/32, Bianco said, noting three-point intraday swings have occurred only a handful of times in bond trading, and usually only when there's been a clear catalyst or event negative for fixed-income. "This is extraordinary to see this kind of weakness on this kind of day," when both stocks and the economic news were weak.

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