The bond market has already prepared for a negative market reaction to the European Central Bank's important policy meeting Thursday, veteran trader Art Cashin told CNBC on Wednesday.
With U.S. Treasury yields remaining steady Wednesday leading up to the ECB meeting, Cashin said the slight rise on the 10-year yields suggests traders are prepared for "disappointment." He said the most likely surprise coming from the ECB would be a move toward negative deposit rates.
"That is quite widely felt in bond circles," said Cashin, UBS' director of floor operations at the NYSE. "That they can't quite live up to what they were hoping to do. They can't do [quantitative easing]. Structurally, they're just not set up for it."
Read MoreWhat market prosexpect Draghi and the ECB to do
With the reaching another record high Wednesday morning, stocks could suffer an initial pullback on news from the ECB meeting Thursday unless there's a "major reaction" in the euro, Cashin said. That scenario remains a "wild card," he added.
"So we'll wait and see," Cashin said. "It's a big lottery ticket tomorrow morning."
Cashin told investors to watch levels of 1,928 to 1,931 as the next major resistance band in the S&P 500.
—By CNBC's Jeff Morganteen.