We often yap about bond yields, but lets turn the tables and actually look at bond futures.
U.S. Treasury Bond Futures Daily Chart
U.S. Treasury Bonds (30-year bonds) are about the safest investment around, and often attract buying during times of economic uncertainty. Whether its concerns over Argentina, economic concerns right here at home, or lack of conviction in stocks, Treasury Bonds have been rallying since the fifth of July. That prevented bonds from falling below the double bottom that formed back in May, but we have now reached a crossroads. T-Bonds have managed to creep above the 38.2% retracement level, but has met resistance at the three-month downtrend. That could very well push prices back down to support at 100. As these two lines continue to converge, T-Bonds are going to have to pop one way or another. A break above the trend line would be bearish for stocks, and a break below 100 would be bullish for stocks. Why you ask? Bonds are a complex animal, but basically as more money flows into bonds, that's less money available for stocks.
10-Year Treasury Notes Daily Chart
Shorter term Treasury Notes, which currently have a higher open interest that T-Bonds, are also stuck at resistance. There is a little bit of upside room to the downtrend, but the 50% retracement level has done a good job of containing any advances the last two days. If prices do roll over, stocks could get a temporary boost as 10-Year Notes fall to 103.8 or 103.