Key Takeaways
- The 10-year Treasury rate tests key support with downside risk building.
- Stock prices and bond yields are drifting lower together, hinting at shifting and potentially bearish macro-risk dynamics.
- A firmer dollar and falling interest rates could signal a broader risk-off rotation.
Last week, I outlined the danger zone. Historically, when Wall Street’s fear gauge lifts into the mid-20s, bad things tend to happen in the stock market.
Today, I am growing increasingly concerned about where the benchmark may venture. For background, falling yields have been a boon for the (particularly SMID caps) ever since Liberation Day and the crafting of the budget-busting One Big Beautiful Bill Act (OBBBA). And, who knows, more fiscal and tax-cut stimulus could be on the way, based on what President Trump hinted at in Tuesday night’s State of the Union address.
To be clear, the rate rise that occurred last April and May was not merely a U.S. phenomenon. Global yields scaled decade-plus highs, which carried Treasuries along with them. Furthermore, for all of the , the great U.S. bond bear market played out from August 2020 through October 2023, when the 10-year soared from 0.504% to 4.997%. The past nearly two and a half years have been merely a consolidation.
But is the coil set to snap?
10-Year Treasury Rate: A Coil for the Ages Following the Great Bond Bear Market. Chart source: StockCharts.com.
Treasuries Under the Spotlight
Notice in the chart below that the may be breaking down through a key support line. A modest fakeout to the upside in January was swiftly sold into, and here we are flirting with a 3-handle on the key interest rate. I like to caution technicians and traders that diagonal trendlines can be fickle; horizontal lines of support and resistance are more reliable. What’s more, log-scale charts are preferred for analyzing such dramatic price (or yield) ranges.
Disclaimers and warnings out of the way, what does the chart say about the 10-year? Below both the 50-day and the 200-day moving averages, the Treasury (price) bulls clearly control the primary trend. The RSI momentum oscillator at the top of the chart has drifted back down toward 30, having never tagged the 70 level during the Q4 rate rise. The green uptrend support line is now in sharp focus — a breakdown below it and a plunge through the late-2025 nadir of 3.947% could send the 10-year yield into the low 3s.
10-Year Treasury Rate: Years-Long Consolidation, Support in Jeopardy (Log Scale). Chart source: StockCharts.com.
On its own, a Treasury overweight would make sense upon a breakdown and bid to bonds. But let’s put on our intermarket analyst hat. What are the market-wide implications?
A New Stock-Bond Relationship?
For equities, chances are that 3–4% intermediate-term interest rates would correspond with weaker economic data: a negative jobs report, ice-cold or inflation, a flip south in sentiment data (like the survey), or another dismal report.
Of course, now that the Q4 earnings season is largely in the books, with NVIDIA’s (NASDAQ:) numbers in hand after Wednesday, it would take downright dreadful off-season reports to shock the market, or a slew of negative preliminary announcements.
Another bond bull market catalyst could come in the form of the . In the “sell first, ask questions later” environment, additional thought pieces and existential AI impact reports could keep investors on edge.
When Trading Ranges Become Problematic
No matter the fundamental spark, it’s clear that stocks and bonds are not exactly moving in lockstep like they were last spring and summer. The SPX, like the 10-year Treasury yield, has been drifting lower lately. We are now nearly a month removed from the ’s (SPY) $697.84 intraday record. And while much has been made about the tight range since late November, you could make a decent case for an emerging rounded-top pattern.
Also, take a look at the RSI momentum oscillator at the top of the chart. It has been on a clear downward path going back to July. Momentum is like throwing a ball in the air: the RSI slows before price reverses. So the story might go: bond yields break down, and stocks follow suit.
SPY: Possible Rounded Top, Weakening RSI, 200-dma Near $650. Chart source: StockCharts.com.
Don’t Sleep on the Dollar
Conspicuously quiet is the (USD). The greenback tallied a low of 95.55 around the time U.S. large-cap equities notched their high. Now, 98 has emerged as a potential boil-over spot.
Treasury yields down, stocks down, up would be a classic risk-off macro price-action situation. The measured move upside price target on the USD would be about 100, just below where the buck met sellers from May through November 2025.
US Dollar Index: Near-Term Ascending Triangle Targets 100. Chart source: StockCharts.com.
The Bottom Line
Is this a doomsday scenario piece? No. Corrections happen. The average intra-year drawdown is 14.2%, with the S&P 500 finishing positive in 35 of the past 46 years. Rather, it’s merely a look at the major asset classes as we approach what has historically been an increasingly volatile month. I like to think of March as October’s little brother. Price moves tend to be amplified and, with the VIX still holding fast to 20, risk management should be the priority.
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Disclaimer: This blog is for educational purposes only and should not be construed as financial advice. The ideas and strategies should never be used without first assessing your own personal and financial situation, or without consulting a financial professional.
