Stocks have seen a massive rally off the March lows, but the S&P 500 seems stuck now just 5% below record highs.
Over the past two months, the benchmark index has moved within a range of 3,000 to 3,300 and struggled to break through to its February record peak of 3,393.
With the economy still recovering from a record decline in the second quarter, Miller Tabak chief market strategist Matt Maley is watching for signs of the breakout for stocks in one corner of the market.
"I'm really looking at the high-yield market, believe it or not," Maley told CNBC's "Trading Nation" on Thursday. "I'm kind of looking for a bit of a pullback in August. But after that takes place, I'm really watching the high-yield market because it's held up very, very well even when we've had downturns for a few days."
Maley is watching the HYG high-yield corporate debt ETF, a fund that tracks the corporate bond market. It is up 4% this month.
The HYG ETF "finally pulled above its 200-day moving average. That is the key resistance for the high yield market, for this ETF, and it's also getting just above the top end of the sideways range it has been in for two months now, above $85," he said.
The HYG ETF was trading at $84.93 on Friday.
"It might pull back a little bit if the stock market sees a little bit of a pullback, but if you can see the HYG break meaningfully above that $85 level, this does mark a good leading indicator for the stock markets many times in the past. So that would be a very bullish sign that the stock market is going to go back up and test those all-time highs rather soon," said Maley.
John Petrides, portfolio manager at Tocqueville Asset Management, said a high degree of uncertainty keeps the S&P 500 stuck in stasis.
"The market is at a total crossroads ... and I wouldn't be surprised if the S&P 500 is stuck rangebound between 3,000 and 3,300 over the next couple of months," Petrides said during the same segment. "The problem investors are wrestling with today is that you could put a high probability on top of the bull case and the bear case."
On the bull side, Petrides said there could be a case made for a 30% move higher for stocks. The bear case, though, could be valid if Covid-19 cases continue to spike and states have to roll back reopenings, he said.
"There are cases that we have a repeat of March and April. I'm hoping that doesn't happen, but it's not out of the question," said Petrides. "By and large, I think stocks can be rangebound, probably or possibly, until the election."
The S&P 500 was lower on Friday and trading at roughly 3,230.