Things are getting exciting for markets, and not simply because bond yields have returned to the core of their prevailing range for 2017 just after all hope looked lost.  Some serious questions are about to be answered, and both sides of the market stand ready to react.

What exactly would markets be reacting to?  While there are number of potential market movers to consider, the 800lb gorilla at the moment is the general notion of "policy gridlock."  This refers to the Trump administration's campaign goals/promises not being able to come to fruition due to a lack of consensus with one or both chambers of congress.  So much of the late 2016 market movement is based on policy expectation that, to whatever extent policy fails to launch, markets must take a serious look at whether current levels are even remotely justified.

The first major revelation on all of this drama will ostensibly arrive with tomorrow's House vote on the new health care bill.  Most media reports suggest chances are not good, and that the bill would probably die in the Senate even if it passes the house.  Forewarnings of the reaction are already on the table.  Specifically stocks put in their weakest day since the election yesterday.  Bonds are at their best levels in a month and gaining ground again this morning.

Much like we began to look for a corrective bounce after so many successive days of weakness earlier this month, there will soon come a time where markets will be looking for a corrective bounce after successive days of strength.  Stay on guard for the possibility that stocks are getting all the selling out of their system (and bonds, buying) ahead of the House vote, and will then embark on a correction that takes rates higher (buy the rumor, sell the news, etc...).

There's a great technical level to watch with that potential bounce in mind: 2.367.  We have yet to close below that level for 2 consecutive days.  There have been 4 distinct attempts and each was a cue for a bounce.  As such, breaking and HOLDING below would let us know that something new and different is happening.

2017-3-22 open

Today's calendar is light, with only Existing Home Sales holding down the fort in terms of upper-tier economic releases.  There are no scheduled Fed speakers.  Everything changes tomorrow, with a House vote expected on the health care bill and a Yellen speech at 8:45am.