• Here's some background on the migration from bonds to stocks.

Here's a bond rout update (hat tip Zero Hedge!) from Gundlach's Double Line.

Stocks are now flat with the May introuction of "taper talk." 

The dearth of long ideas reflects my cautious market outlook and my sense of discipline in not forcing long buys unless I see the right pitch.

Thanks for reading my diary today. Enjoy your evening!

• How much to buy?

My mavens on the floor of the exchange see $185 million to buy on the close.

Information technology has $175 million to buy, and financials has $150 million to buy.

Citigroup (C) has $140 million to buy, Visa (V) has $90 million to buy and MasterCard (MA) has $85 million to buy. Johnson & Johnson (JNJ), Time Warner Cable (TWC) and Schlumberger (SLB) are all at about $25 million to sell each.

• So I don't push and force trades.

You're out of touch

I'm out of time

But I'm out of my head when you're not around.

-- Hall and Oates, "Out of Touch"

When I am as out of touch as I have been, I don't push and force trades.

Period.

• Run, don't walk, to watch me on 'Futures Now.'

Here is my appearance on CNBC.com's "Futures Now" today.

• Bidding $17.25 for Altisource Residential (RESI).

It's a good name for yield-hungry investors.

• Italy taken down a notch.

S&P has downgraded the credit rating of Italy to BBB from BBB+. But the move just puts them in line with a Moody's downgrade to a similar level of Baa2 about one year ago. This is just playing catch up.

• Good piece by John Hussman.

"Deflationary Boom?"

• Tomorrow, we get the 10-year.

The three-year auction was fine, with the yield of 0.719% in line with the when-issued market.

The bid-to-cover of 3.35 was below the previous one-year average of 3.50 but above the June's 2.95.

Direct and indirect bidders demand was good, coming in at the best since January.

Tomorrow, we get the 10-year, which will be a good test of elevated yields.

My guess it will be a good one as yield hounds devour it.

• Here's what he has to say at midday.

From Art Cashin at midday:

Looks a bit like a rerun of Monday.  Europe eased up on accelerator a bit as session wore on.

Good three year auction lifts U.S. stocks through nearby resistance.

Run rate at 1:00 projects to 620/700.  (Yesterday got blown up by 150 million closing print in Sprint.)

• To new highs, that is.

Mr. Market appears to be on a mission to new highs now.

• And take Mr. Market with them.

Banks totally reverse the weakness in the morning, taking Mr. Market with them.

• Zero Hedge reports. 

From Zero Hedge:

As reported over the weekend, when the IMF leaked Christine Lagarde has taken some time away from her busy tanning booth schedule to revise her outlook on global growth, the most recent revision of IMF projections would hit some time this week. It just did. And while the fund's 2013 global outlook came in as expected, or down from 3.3% to 3.1%, we now have the full breakdown of the IMF's crystal ball predictions broken down by region.

But wait, there's more.  We also went back in time and compared the current, July, World Economic Outlook projection, with the IMF's previous ones going back to the beginning of 2012. We have compiled the resultant hilarious data showing the IMF's utter cluelessness about the future in the charts below. All we can say is one hasn't seen a hockeystick, until one see the IMF's latest progression from 2013 to 2014 growth and shown below.

Here are the IMF's latest, and prior, forecasts presented without commentary. None is needed.

• Reward vs. risk is simply not attractive.

As I mentioned earlier, we are now nearly 95 S&P handles above the lows of two Mondays ago.

Reward vs. risk is simply not attractive.

I wouldn't force long side buys.

• Namley, my TWM long and my SPY short -- again!

I just added to my SPDR S&P 500 ETF (SPY) short at $164.78, and I have added to my ProShares UltraShort Russell2000 (TWM) long at $16.62.

• Morgan Stanley's Peter Boockvar has some interesting thoughts on the subject.

Some interesting thoughts from Morgan Stanley's Peter Boockvar on global easing: 

Doing his best not to let Ben Bernanke disrupt the best laid plans of the European Central Bank of keeping interest rates in their continent as low as possible for as long as possible, German ECB member Asmussen, according to Reuters, repeated that the ECB forward guidance goes beyond 12 months (basically what was said last Thursday). He also said in an answer to a question about a new LTRO program that he would not rule this out. He was also quoted as saying "if needed we have a range of standard and non standard measures we can deploy." Not a surprise but its reiteration turns to the coming battle of central banks.

Bottom line, the Federal Reserve has inadvertently but not surprisingly to most of us (especially emerging market investors), exported its monetary policy to the rest of the world not just over the last 5 years but also during the mid 2000's. Now with the possibility of some reversal, interest rates have risen in sympathy overseas just at the time when it is least welcome. So, in essence, we have the Federal Reserve as central banker of the world when the global economy is running on multiple speeds.  

The euro is at the low of the day vs the $ as a result, touching its lowest level since April.

• Since then, risk-free rates of returns have spiked.

We are now back to S&P 500 levels during the week of June 18, right before the Fed chairman talked taper.

Since then, risk-free rates of returns have spiked.

• I would have no problem paring down Northwest Bancshares at these prices.

Though I think Northwest Bancshares (NWBI) will ultimately head higher, I would have no problem paring down the position at these prices.

It is my view that both the regionals and money centers could back and fill in here.

• Rumor has it.

My gnome is hearing that Bill Ackman's new target could be FedEx (FDX).

I have no clue if the rumor he is hearing is accurate.

• Namely, my TWM long and my SPY short.

I added small to my ProShares UltraShort Russell2000 (TWM) long at $16.65 and my SPDR S&P 500 ETF Trust (SPY) short at $164.67 in this morning's ramp.

• Break in: New bank capital rules are hitting the banks somewhat and the general market.

• But I am holding off for now.

Procter & Gamble (PG) is back into my short-selling area, but I am holding off for now.

• The S&P 500 continues to outperform the Nasdaq in the first few minutes of trading.

Yesterday's pattern of the S&P 500 outperforming the Nasdaq continues in the first few minutes of trading.

I would add that over the past few months, I have observed the weakness in capital spending -- this likely accounts for the weakness in the technology-led Nasdaq of late.

• There is plenty of supply coming in the wounded bond market.

A heads up: There is plenty of supply coming in the wounded bond market.

Supply is a-comin'.

• Today: 32 billion three-year notes
• Tomorrow: 21 billion 10-year notes
• Thursday: 13 billion long bonds

• Southwest Securities' Mark J. Grant takes a classics approach.

This morning Southwest Securities' Mark J. Grant talks classics and...Greece: 

"Ruin, eldest daughter of Zeus, she blinds us all, that fatal madness¿she with those delicate feet of hers, never touching the earth, gliding over the heads of men to trap us all. She entangles one man, now another."

-- Homer, The Iliad

Greece has replaced "Ruin" in this notation. The nation has overtaken the daughter of the old gods and stands in her place. The country is now a funeral hymn chanted in an eerie kind of banshee wail promising a better place to come while the actuality of death hangs over the nation like some black plague of eons past.

It is a discordant note.

"Like a girl, a baby running after her mother, begging to be picked up, and she tugs on her skirts, holding her back as she tries to hurry off¿all tears, fawning up at her, till she takes her in her arms... That's how you look, Patroclus, streaming live tears."

-- Homer, The Iliad

Greece was given some money, possibly some money as each European nation is yet to agree, to tide them over. The EU discusses it as if it is more assistance until the next October tranche. The money is to be doled out slowly as if eye drops were the answer. The EU presentation is nothing more than Faustian fantasy as the real reason for the minor distribution is the upcoming German elections where nothing must upset the cart of Bratwurst. Nothing!

There is the usual, "Greece must do this and that" and the, "All Hail the progress of the Greeks" and the words drone on once again and the repetition is endless as you feel like you are back at the Parthenon in ancient and grander days. The ECB was kind in giving up $1.9 billion of their profits and the independence of the ECB is called into question once again but no matter as Ms. Merkel will instruct her unruly student how to behave.

"...[A]nd they limp and halt, they're all wrinkled, drawn, they squint to the side, can't look you in the eyes, and always bent on duty, trudging after Ruin, maddening, blinding Ruin. But Ruin is strong and swift¿She outstrips them all by far, stealing a march, leaping over the whole wide earth to bring mankind to grief."

-- Homer, The Iliad

As I stated previously; Greece has replaced "Ruin" and stands bent and twisted in her place. The money lent to them can never be repaid and any contrary view is little more than myth and story about a long forgotten Athena. A tale once believed, then told to children and now an ancient piece of parchment trod into the dust of Marathon.

There will be a Day of Reckoning and it is not so far off now but it will be after the German elections and on that point rests certainty. Soon it must be debt forgiveness or the ending of Pan's Pipe dream and then we may well see the final chapter of this Greek tragedy played out in the streets. The battle will be vigorous and the have-nots of the European nations will demand what the rest do not wish to give and the sounds of ranting and raving will be heard again in Berlin, Madrid and Athens. For now though a little more pabulum and a little more time before the bough breaks.

"And fate? No one alive has ever escaped it, neither brave man nor coward, I tell you - it's born with us the day that we are born."

-- Homer, The Iliad

• My view is that the S&P 500 has 50 points to the upside and more than 100 points to the downside.

The June National Federation of Independent Business released its small-business optimism index just now.

This series is typically not market-impactful.

At 93.5 compared to expectations of 94.9 and May's reading of 94.4, it came in at a one-year high but only because the index has been range-bound for one and a half years. The long-term average of this series is 98, well above the June print.

Small businesses are still negative, and the percentage of firms anticipating an improvement in the economic outlook (better sales) dropped to only 5% (a loss of 2 points).

Overall, tying this report to other measures of business confidence suggests stability but little upward thrust. There is a modest improvement in hiring, but most manufacturing indices (e.g., ISMs) are mixed, inventories are not building and capital spending relative to profits is low by historic standards.

On this score, watch the potentially nascent rise in unit labor costs (payrolls), as productivity gains seem behind the sector. As well, the recent U.S. dollar strength and still-modest top-line growth exposes profit margins, which are at multidecade highs and are the Achilles' heel to (too high) second-half corporate profit growth expectations. With basically flat sales growth, it is hard to see business loosen its purse strings going forward.

The volatility seen recently in the fixed-income markets when combined with the aforementioned challenging earnings outlook could limit market upside.

My view is that the S&P 500 has 50 points to the upside and more than 100 points to the downside, an unfavoraborable reward vs risk.

• Let's take a peek at overnight and early-morning price action in a number of asset classes.

Despite my protestations, the market wants to take us higher:

• S&P futures +5 (down 4 handles from when I awoke at 5:00 a.m. EDT);
• Nikkei + (back to mid-May highs);
• European markets +;
• euro -;
• crude flat;
• gold +$13;
• no significant change in sovereign debt yields in Europe; and
• the 10-year U.S. note yields 2.66% (flat day over day).

Worth mentioning:

• Stocks rallied (the Friday jobs high continued) from the get-go yesterday but treaded water after the initial opening surge during the first 30 minutes of trading.
• I remain net short but not over my skis. New shorts yesterday were put on in Home Depot (HD) and Lowe's (LOW) based on my housing thesis expressed in my opening missive.
• Alcoa's (AA) earnings were in line. Intuitive Surgical (ISRG) was a disaster.
• All Things Digitaladdresses rumors of a Microsoft (MSFT) restructuring on Thursday.  
• The U.S. deficit forecast was cut slightly.
• I continue to stress that the eurozone's economic plight remains on center stage. German exports had their largest monthly fall since late 2009.
• The IMF updates its economic forecast today. (Look for a lowering of projection)
• Last night it was reported that China's inflation rate was a bit hotter than expected, but producer prices dropped more than consensus forecasts. The Chinese stock market only rose modestly.

In the press:

• "Why Underemployment May Be Worse Than It Looks";
• Eliot Spitzer is back in the news;
• "Detroit's Greek Tragedy" 
• the FDIC will propose 5% to 6% capital ratios for banks today;
• The Wall Street Journal talks my book on housing affordability; and
• inflation in New York City rental apartments.

Below is a list of macroeconomic and microeconomic releases and meetings today:

• Japan machine tool orders (2:00 a.m. EDT);
• China trade data for June (Tuesday night);
• U.S. JOLTs job openings (May);
• eurozone finance ministers will meet July 8 and July 9 (they will discuss Greece among other topics);
• the International Monetary Fund releases its latest assessment of the world economy;
• Sun Valley Conference kicks off (runs through July 14);
• The Dunkelberg Report on small business confidence;
• FDIC meeting at which a new higher leverage ratio could be considered (10:00 a.m. EDT);
• Analyst meetings for Danaher (DHR), General Mills (GIS), j2 Global (JCOM), KLA-Tencor (KLAC), Lam Research (LRCX);
• Earnings after the close -- Adtran (ADTN, conference call Wednesday morning); and
• SEMICON West in San Francisco (July 9-July 11).