Yesterday morning's notes presented a mostly bullish case for bond markets with today as the first potential break from the corrective/consolidative post-rally weakness.  Today, let's talk about what to watch for if things turn out to be less than bullish.  It's pretty simple really, and goes back to the "gap" that we've discussed a few times since it's formation with the start of trading last week.

Gaps like these serve one of two purposes.  They either constitute a warning about the end of a rally or hint that it is shifting into higher gear.  Normally, we'd expect the gap to be "filled" more quickly if it was warning about the end of the rally, so that's hopeful. 

In the event that bond markets are weakening, however, the gap serves an important defensive purpose.  If yields steamroll right through it and end up over 2.30, for instance, run for cover.  If the move is more gradual, and ESPECIALLY if yields undergo a noticeable sideways grind in or near the gap, then all hope is not lost, even if the gap is broken.  Reason being: "filling the gap" can also be a signal for buyers to get back in the market, and that possibility would remain as long as we don't get that first "steamroller" scenario.