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It's official now: The stock market is a tease.

Just as bulls were thwarted in an attempt to regain control of a range-bound market

last week, bears were similarly frustrated Monday after some early flirtation with a technical breakdown.

After faltering Thursday upon approaching the high end of its recent 970-to-1015 trading range, the

S&P 500

kept sliding Friday. The index, which really does represent the market to most investment professionals, stumbled through the bottom end of its range Monday morning, trading as low as 966.79 at about 10:35 a.m. EDT. But shares rallied steadily from there, denying skeptics an opportunity to declare the market's uptrend technically over.

Instead, the S&P settled up 0.3% to 982.82, ending inside its range, where it has been making a home for about six weeks.

While the technical significance was somewhat less dramatic, other major averages followed similar patterns. After trading as low as 9048.65, and below its 50-day moving average of 9090.06, the

Dow Jones Industrial Average

recovered to end up 0.4% to 9186.04. The

Nasdaq Composite

finished off 0.1% to 1714.10 but well above its intraday low of 1687.80, or about 20 points above its 50-day moving average.

Despite the comeback by major averages, declining stocks led advancers nearly 2 to 1 in

Big Board

trading and by 3 to 2 in over-the-counter activity. At 1.3 billion shares on the Big Board and nearly 1.6 billion in Nasdaq trading, volume was in line with recent levels, albeit decent for a summer Monday.

Contributing to the Comp's relative weakness was

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Additionally, Internet bellwether



shed another 1.9% to $103.33 after trading as low as $101.80. Internet Index fell 0.6% and is now down 6.1% since its recent closing high on July 14.

As Worries Rise, Bonds Rally

In a session in which the day's macro economic news was largely ignored -- June factory orders rose a stronger-than-expected 1.7% -- and corporate news was fairly light, the intraday machinations were largely about technical factors and goings-on in fixed income.

There's been rising consternation among equity market participants about the recent wicked selloff in Treasuries. Legitimate concerns range from whether higher yields will scuttle the economy's recovery and provide unwanted competition for stocks, to whether they'll crimp earnings of rate-sensitive corporations, most notably financials. The closely watched Philadelphia Stock Exchange/KBW Bank Index rose 0.6% to 873.88 Monday, right at its 50-day moving average, after trading as low as 851.60 intraday. Industry bellwethers




J.P. Morgan


each enjoyed a reprieve from recent selling.

Additionally, there were (and are) ongoing concerns about various institutions exposed to mortgage-backed securities markets, including

Fannie Mae



Freddie Mac


. Fannie Mae shares rose 1% and Freddie gained 0.4% Monday.

With such concerns reaching a fever pitch over the weekend and into Monday morning, Treasuries were set up for an oversold bounce, which is what occurred. The price of the benchmark 10-year Treasury rose 18/32 to 94 25/32, its yield falling to 4.31%.

The rally was mainly technically driven, because the fundamental news was not bullish for Treasuries. In addition to the aforementioned factory orders, the Commerce Department said late Monday that construction spending rose 0.3% in June rather than being flat, as reported Friday. Discovery of a "processing error" that affected estimates for single-family homes was cited by the department. There's also the issue of the Treasury's $60 billion refunding auction later this week.

Amid myriad press reports about the potential negatives associated with the Treasury market's recent tumult, it's interesting to note how quickly some have declared the bond market to be a great buy. To wit, a survey by Ried, Thunberg showed positive sentiment about Treasuries to be at its highest level since May, indicating those institutional investors surveyed expect Treasury prices to rise and yields to fall in the coming weeks.

Meanwhile, Morgan Stanley's technician, Rick Bensignor, opined as to why "we are close to a correction to the recent bond selloff," citing, among other factors, only 4% Treasury bulls in Friday's Daily Sentiment Index reading. Monday morning's level was a still-low 9%, he noted.

"Although it doesn't necessarily mean we have hit the high in yields for the move, we certainly seem to have hit a sentiment extreme, so it appears a tradeable top for aggressive accounts is near at hand," Bensignor opined.

Monday's Treasury rally supported these views, but Bianco Research wondered: "Contrarians, is this how a low

in price is made?"

Making the Rounds

Speaking of sentiment, there was a rise in bearish sentiment early Monday, as measured by the CBOE put/call ratio, which traded above 1.0 midmorning vs. last week's average of 0.85. Similarly, the VIX traded as high as 24.90 intraday Monday vs. last week's low below 20. At day's end, the put/call ratio was at 0.93 and the VIX was actually down 0.6% to 22.65.

The VIX's round trip to back below break-even reflected the market's comeback and participants' ongoing sense of optimism.

"It is a mistake, we think, to relax your search for attractive opportunities by concluding that the market's broad advance has hit a wall," wrote Thomas McManus, equity portfolio strategist at Banc of America Securities. "The broad market has continued to provide attractive returns even while the S&P has been rangebound."

Without specifying names, McManus noted that cyclical stocks have been outperforming consumer staples since early June 4, a performance that "would tend to support the notion of an improving economy."

In addition, small- and mid-caps continue to outperform big-caps, suggesting that major averages' sideways action understates the market's broader strength. Meanwhile, he noted that non-dividend-paying stocks have outperformed their dividend-paying counterparts in the past two months in each of the S&P indices (S&P 500, MidCap 400 and Small-Cap 600).

To an optimist, outperformance by non-dividend-payers suggests investors remained enamored with growth, have faith in the economy and are willing to take risks. To skeptics, it means investors learned nothing during the bubble and are too eager to take risks and chase momentum.

As the debate rages, the market remains stuck within its recent range.

Aaron L. Task writes daily for In keeping with TSC's editorial policy, he doesn't own or short individual stocks, although he owns stock in He also doesn't invest in hedge funds or other private investment partnerships. He invites you to send your feedback to

Aaron L. Task.