Treasury Notes kicked off a rally just before the turn of 2016 and ran higher through the beginning February. The test of a robust resistance zone, established in late 2012 and early 2013 finally stopped the rally in Notes.
The pullback from the initial test of resistance at 132’245 – 133’265 has spent a few weeks consolidating just below a key near-term resistance level at 131’055. If notes catch a bid and are able to push above 131’055, this would open the door for another move to test the higher zone of resistance.
Another detail regarding the run higher in notes over the first 6 weeks of the year, that run exactly coincided with the stock market’s terrible start to the year, with the S&P declining more than 12% over the same stretch.
If notes can break above near-term resistance and resume movement to the upside, this would be supportive of a potential renewed decline in stocks. There are key areas of support in the stock indices, particularly 1810-1820 in the S&P 500 index ($SPX), that would be the ultimate arbiter of how severe any renewed decline could become. However, if notes begin to push higher again, this would be something to have an awareness about in forming future expectations about the stock indices.